Want stable income from mutual fund investments in short-term? Here is your option

Mutual fund investments are subject to market risk and hence expecting stable income from it, especially in short-term time-horizon, is something that most of the investors expect. It becomes further difficult when we are coming across a financial year when the stock market has remained highly volatile. However, for information of mutual fund investors, Ultra-short duration funds are those that still have the ability to fulfill this expectation of the investors. According to the investment experts, ultra-short duration funds are fixed income mutual fund schemes but one should not get confused with the liquid fund and ultra-short duration fund.

Speaking on the ultra-short duration fund Vaibhav Shah, Head – Products, Mirae Asset Investment Managers India said, "Ultra-short duration funds are fixed income mutual fund schemes which invest debt and money market securities such that the Macaulay Duration of the scheme portfolio is 3 months to 6 months. These funds are suitable for short term investments since they are less volatile and aim to produce more stable income compared to funds with longer duration profiles."

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Shah said that many investors get confused between liquid funds and ultra-short duration funds adding, "The main difference between the liquid fund and ultra-short duration fund is the maturity or duration profile of the two schemes. Liquid funds invest in debt or money market instruments that mature in 91 days, while Macaulay Duration of ultra-short duration funds is 3 to 6 months. The yield curve is usually upward sloping."

On who should invest in ultra-short duration funds SEBI registered tax and investment expert Jitendra Solanki said, "Ultra-short duration funds are advised for those investors who want to invest for short-term time horizon, maybe from three months to one year." Asked about the return post-tax payment Solanki said that an investor can expect around 4 per cent to 4.5 per cent in such a mutual fund.