Best Mutual Funds for Short-Term Investments of $100,000

Thank you for considering mutual funds for your short-term investment of $100,000. Before diving into specific recommendations, it is essential to note that investing should align with your specific financial goals. Based on your mentioned time horizon of 1 to 2 years, I would suggest focusing on short-term debt mutual funds, which are known for their relatively lower risk and stability during this period.

Choosing the Right Fund

When selecting short-term debt mutual funds, it is important to consider factors such as past performance, expense ratios, credit ratings, and duration. Here are some top short-term debt mutual funds that you might want to consider:

ICICI Prudential Short Term Bond Fund - G Axis Short Term Bond Fund - G Franklin India Short Duration Fund - G Aditya Birla Advantage Short Duration Fund - G Modi Straight Short Duration Fund - G

These funds are designed to provide stability and predictability, making them suitable for your short-term investment needs. They typically provide returns higher than fixed deposits (FDs) but with a slightly lower risk profile.

Understanding Mutual Funds

Mutual funds come in two primary types:

Debt or Bond Funds Equity or Stock Funds

It's important to note that there are very few mutual funds that cater specifically to periods shorter than 3 years. This is because:

Equity Funds: These are generally recommended for investors with a time horizon of at least 8 to 10 years. They have historically provided the best returns over the long term, but they are highly volatile in the short term. A significant example of short-term volatility occurred during the 1929 stock market crash in the USA, where losses could reach up to 90%. Debt Funds: While debt funds are often considered safer, their performance is closely tied to interest rates. When rates decline, debt funds perform well, and vice versa. Currently, interest rates in India are likely to rise, which could negatively impact debt funds. For this reason, debt funds are currently in a state of decline.

If your investment horizon is less than 2 years, a fixed deposit (FD) might be a more suitable option as it offers guaranteed returns with lower risk.

Further Guidance

For more detailed guidance on selecting mutual funds based on your time horizon and investment goals, I recommend reading this article:

Great Article on Selecting Mutual Funds Based on Goals and Timeframe

Please note that fund ratings can change over time. Therefore, use the concepts discussed in the article and check the updated performance of the funds on financial platforms like:

CNX MFNow

Additionally, there are many excellent articles on my blog that you might find useful. Best of luck with your investment journey!

Happy investing!