One of the first lessons conveyed to new investors is that stock mutual funds, and to some extent bond mutual funds, should be viewed as long-term investments. This means that money you might need within three to five years should not be invested in stock mutual funds or long-term bond funds. Show
However, some mutual funds are appropriate for short-term investing. Learn the types of funds that can provide some return on investment while keeping the principal amount you invest relatively safe. Key Takeaways
What Is Short-Term Investing?Short-term investing involves a financial investment that can be easily converted to cash, typically within a three-to-five-year timeframe. Many investors seek better short-term investment options than a savings account or a certificate of deposit (CD). The national average interest rate for savings accounts in mid-April 2021 was just 0.06% for balances of $2,500. The interest rate for a 12-month $10,000 CD was 0.14%, according to the Federal Deposit Insurance Corporation (FDIC). One common parking place for short-term investments is a money market mutual fund. There are many types of money market funds. They generally limit risk by choosing to invest in high-quality bonds, short-term government bonds, tax-exempt municipal bonds, and corporate and bank securities. NoteIf you’re new to investing, reaching out to a financial advisor can be a good first step for formulating a strategy that suits you. The Best Mutual Funds for Short-Term InvestingSome bond funds provide a fairly safe short-term investment while offering higher yields and returns than money-market mutual funds or other short-term products. Here’s a closer look at the types of funds that work well for short-term investing. Money Market FundsMoney market funds were created during the 1970s. They were designed as an option for investors to purchase a pool of securities that often provide higher returns than interest-bearing bank accounts. Some money market funds are meant for retail investors. Funds that require a high-value minimum investment are designed for institutional investors. Money market funds are not the same as the money market accounts that are offered by banks. Money market accounts are insured by the FDIC, but money market funds are not. Money market mutual funds can be split into three groups:
Ultra-Short Bond FundsUltra-short bond funds invest in fixed-income securities that pay you back after less than a year. These funds may invest in a wide range of securities, including corporate debt, government securities, and mortgage-backed securities. NoteInvestors should be aware that ultra-short bond funds have a higher risk than money market funds and CDs. A Morningstar review of ultra-short bond funds includes a handful of funds that report a 12-month yield over 2% (as of May 2021). These include:
Short-Term Bond FundsShort-term bond funds invest in bonds that mature in one to three years and offer high liquidity. These bonds have a low interest-rate risk compared to bonds with longer terms, which allows them to weather adverse market conditions. However, you can lose your principal with short-term bond funds. Short-term bond funds that are highly rated by Morningstar include, as of May 4, 2021:
Which is the best mutual fund for short term?List of Best Ultra Short Mutual Funds Mutual Funds in India. Which investment option is best for short term growth?Following are some short term investment options:. Savings accounts. One of the easiest and safest way to access your money is by having a savings account. ... . Liquid Funds. ... . Short term funds. ... . Recurring deposits (RDs) ... . National Savings Certificate (NSC) ... . Arbitrage funds. ... . Fixed maturity plans (FMPs). Can I invest in mutual funds for 3 months?For a short period of 3 to 6 months, you can either park your money in liquid mutual funds or ultra short term debt mutual fund. Liquid Mutual Funds usually invest in government securities and certificate of deposits of up to 3 months duration.
Which mutual fund is best for 6 months?Here is a list of the best short-term mutual funds in India that you can invest in for the next year.. Top Short Term Funds 2022.. 1) Aditya Birla Sun Life Money Manager Fund - Direct Plan-Growth.. 2) Sahara Liquid Fund Variable Pricing Direct-Growth option.. 3) Quant Active Fund Growth.. |