Loans are one of the best options for people who want to cover expenses like education fees, medical costs, rent, fuel, and more. However, what if there was a way to fulfil your needs without borrowing? Investing your own money can do that, helping you achieve your short-term goals.
Debt funds are one of the options at your disposal.
What are debt funds?
When companies need money, they borrow funds from investors in exchange forbonds or NCDs (Non-convertible debentures). When you
invest in mutual funds online, such as a debt fund, you are lending money to a company indirectly through mutual funds. In return, the company pays interest or coupons. These interests orcoupons accrued can deliver returns.
There are various types of debt funds like
liquid mutual funds, short-term income funds,and ultra-short-term mutual funds. They can be used to meet your short-term financial goals.
Types of debt mutual funds for upto 3 years
If you wish to invest in mutual funds online over the short term, you can consider the following options:
1.Floating-rate Funds :Floating-rate funds are debt funds that invest in floating rate instruments where the yields change with any variation in benchmark rates. These funds may also invest in fixed coupon instruments that can be converted to floating rates using swaps or overnight index swaps.
2.Short-term Income
Funds:Short-term income fundsinvestin debt and money market securities. These are open-ended funds with an investment horizon ranging between one year and three years.
3.Corporate Bond
Funds:Corporate bond funds invest more than 80% of their funds in corporate bonds. However, corporate bonds with higher interest rates can carry higher credit risk too.
4.Low duration and ultra-short-termmutual funds: If you wish to invest in mutual funds online for less than one year, you can consider low duration and ultra-short duration mutual funds.
Low-duration funds invest in debt instruments or money market securities with a 6–12 months investment horizon. On the other hand, ultra-short duration mutual funds have an investment horizon of 3–6 months.
5.Liquid mutual
funds:Liquid funds carry less risk. They invest in short-term debt instruments with a maturity of less than 91 days. Liquid mutual funds can be used as an alternative to a traditional investment mode and are often used by investors for parking emergency funds for short-term purposes. These can be suitable if you are looking for a safe place to park your funds. The returns are broadly stable as there are little to no fluctuations in the fund’s value.
To sum it up
If you are looking for short-term options to invest in mutual funds online, the debt fund options given above can be a feasible choice. You can use a
SIP calculator and make the right investment decision as per your financial goals.
Disclaimer: The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
Disclaimer: The results for SIP calculator are based on an assumed rate of return. Please get in touch with your professional advisor for a detailed suggestion. The results are based on an assumed rate of return. The calculations are not based on any judgments of the future return of the debt and equity markets / sectors or of any individual security and should not be construed as promise on minimum returns and/or safeguard of capital. While utmost care has been exercised while preparing the calculator, NIMF does not warrant the completeness or guarantee that the achieved computations are flawless and/or accurate and disclaims all liabilities, losses and damages arising out of the use or in respect of anything done in reliance of the calculator. The examples do not purport to represent the performance of any security or investments. In view of individual nature of tax consequences, each investor is advised to consult his/ her own professional tax/ financial advisor before taking any investment decision.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
