Benefits of Ultra Short Term Debt Mutual Fund

Mutual Fund

Debt funds are mutual funds which invest in short-term instruments. There are a variety of debt funds where you can invest depending on the maturity period and fund liquidity. Here we will discuss one of the debt fund variant- Ultra Short Term Bond. 

Ultra Short Term Debt Mutual Fund invests in fixed income securities like commercial papers and money market instruments with a maturity period of more than 91 days. The investment horizon period of ultra short term mutual fund ranges from 7 days to 540 days i.e 18 months. These funds are ideal for those who want to earn a good return by investing for 1 to 9 months. 

Benefits of Ultra Short Term Debt Mutual Fund

Here are some benefits of ultra short term mutual fund investment-

  • Ultra Short Term Debt Mutual Fund provides a high return.
  • If you want to earn a good amount of return through mutual fund investments for a short period of less than a year, then ultra short term debt mutual fund is ideal for you.
  • Ultra Short term mutual fund helps in generating wealth for the emergency situation. In order to finance the emergency situation, ultra short term debt mutual fund comes up as the best mutual fund option.
  • As an alternative to short term bank deposits, ultra short term debt mutual fund is the best choice for earning a decent return.
  • Ultra short term mutual fund can be used for parking money that you might need for paying your child’s school fee or insurance premium after a good 6 to 7 months.
  • Investing in ultra short term debt mutual fund not only serves your short term investment needs but also additional benefits with systematic transfer plans.
  • Ultra short term mutual fund invests in both debt and equity instruments to minimize the fund’s volatility. 
  • If you are afraid of investing in an equity fund, you can invest in ultra short term debt mutual fund and can instruct the fund manager to transfer a specific amount every month to an equity fund of the same fund house.
  • Ultra short term mutual fund gives a better return than liquid funds.
  • The interest rate risk of ultra short term debt mutual fund is very low as compared to other debt mutual funds.
  • Ultra short term debt mutual fund gives a good return of 7 to 9% which is quite high as compared to liquid funds.

Points to consider regarding Ultra Short Term Debt Mutual Fund

  • The returns from ultra short term debt mutual fund are quite high. Around 7% to 9%. 
  • These funds can be used for any kind of expenses for example school fees which you need to bear after 7 to 8 months.
  • An expense ratio up to 1.05% is charged for ultra short term debt mutual fund.
  • The investment horizon of ultra short term debt mutual fund is a little longer than liquid funds thus ensuring a decent return.
  • Ultra short term debt mutual fund helps in meeting short term financial goal.

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