My bank FDs are maturing this month. I want to invest the amount in a debt mutual fund. My investment horizon is one year. Should I invest the money in a liquid fund or short term debt fund or a money market fund?

I have shortlisted the following mutual fund schemes:
Mirae Asset Cash Management Fund
Tata Money Market Fund
L&T Money Market Fund
Kotak Low Duration Fund

— Saurabh Batra

After the Sebi re-categorisation of mutual fund schemes, this is how the debt mutual funds you have mentioned work:

Liquid funds invest in debt and money market securities with maturities of up to 91 days.

Ultra short duration funds invest in debt and money market securities, with duration of portfolio between three to six months.

Low duration funds invest in debt and money market securities, with duration of portfolio between six to 12 months.

Money market funds invest in money market securities with maturity of up to one year.

As you can see, if you match your investment horizon with the schemes, your options are low duration funds and money market funds. However, many debt mutual funds investors stick to ultra short duration schemes to avoid extra volatility and risk.

In short, apart from matching your investment horizon with the investment duration of the scheme, you should also choose a scheme that is in line with your risk profile.





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