Is there a lock-in period for ultra short term funds?

What are ultra short term funds? Can they be used for money sitting idle in savings accounts? Do they have a lock-in period?
-Rajesh Selvanathan

Ultra short-term funds invest in securities with a residual maturity of not more than 1 year. They are a suitable option to park your surplus for a few months to a year. Although they do not offer guaranteed returns or safety of capital, the risk is negligible. You can expect to earn slightly higher returns by assuming slightly higher risk in comparison to a savings account. These funds do not have any lock-in period. After submitting a redemption request, you can typically get you money back in 1 or 2 business days. The withdrawal will have tax implication as debt funds.

A few fund houses are now allowing instant redemption facility.

This article was originally published on June 22, 2017.