Short term usually means 0 – 3 years. Even within this range, different funds work better at time periods. Liquid funds work best for periods up to 3 months, Ultra Short Duration funds work best for 3 months – 1 year and Short Term Funds for periods of 1 – 3 years. You can find below a table of funds with a good track record in each category:
| Fund Category | High Performing Funds | Time Period |
| Debt Liquid | Axis Liquid Fund, L&T Liquid Fund | 0 – 3 months |
| Debt Ultra Short Duration | Reliance Ultra Short Duration Fund, SBI Magnum Ultra Short Duration Fund | 3 months – 1 year |
| Debt Short Duration | DHFL Pramerica Short Maturity Fund, HDFC Short Term Debt Fund | 1 year – 3 years |
What is an Index Fund?
An Index Fund is a mutual fund which tracks an index such as the Nifty or the Sensex. It invests in the stocks that are part of the index, in the same weights as they occupy in the index. It is thus ‘passive’ in nature and does not need a lot of active management by the fund manager. As a result, its expenses are lower than active funds. An index fund can be bought just like any other mutual fund. This sets it apart from a close relative – an Exchange Traded Fund (ETF). An ETF also invests passively in an index but must be bought on the stock exchange using a demat and trading account.
What are Money Market Funds?
Money Market funds are a type of debt mutual fund that primarily aim at providing high levels of liquidity, capital preservation and moderate levels of income to the investor. These schemes feature low levels of volatility as they mainly invest in short residual maturity (less than 1 year) instruments including inter-bank call money, commercial papers, certificate of deposits and treasury bills. These are ideal for short term parking of excess funds by individual and corporate investors.
What is an ELSS Fund?
ELSS i.e. Equity Linked Savings Scheme is a special category of equity mutual funds that provides tax benefits of up to Rs. 1.5 lakhs annually under Section 80C of the IT Act. An ELSS scheme has a lock-in period of 3 years counted from the date of unit allocation, which is shorter than any other tax saving option under Section 80C (such as PPF or National Savings Certificates). As per current SEBI rules, ELSS funds are required to invest at least 80% of assets in equities and equity derivatives.