What is the Macaulay duration?

Macaulay duration is a way to measure how long, on average, it takes to get your money back from a bond investment—considering both interest payments and the final maturity amount. The Macauley duration for mutual fund Ultra Short Duration is a handy indicator of how sensitive the fund might be to interest rate changes. A shorter duration usually means less volatility when rates move.

How do you assess the performance of Ultra Short Duration Funds?

Evaluate historical returns, consistency, expense ratio, and the credit quality of the underlying securities.

What’s a reasonable time frame to stay invested in Ultra Short Duration Funds?

These funds are best suited for holding periods of anywhere between three months to a couple of years. Staying invested within this range helps you ride out minor rate movements and make the most of the fund’s income-generating potential without taking on unnecessary risk.

When is it a good idea to consider investing in one?

If you’ve got surplus funds that you don’t need right away—say for upcoming expenses within the next 1–2 years—ultra short duration funds can be a smart alternative to a savings account. They offer better yield potential with relatively low exposure to interest rate swings, making them ideal for short to medium-term financial goals.

Should I invest in Ultra Short Duration Mutual Funds?

If you are looking for a balance between risk and return for a 1-3 year investment horizon, Ultra Short Duration Funds can be a suitable option.

How much should I consider investing in Ultra Short Duration Funds?

The amount depends on your personal financial goals, how comfortable you are with some level of risk, and how long you plan to keep your money invested. It’s best to align your investment size with these factors rather than investing a fixed sum without considering your overall financial plan.

Are Ultra Short Duration Funds risky investments?

They come with moderate risk. While they are generally safer than longer-duration debt funds, they are still exposed to interest rate changes and the credit quality of the securities they hold. This means some fluctuations in returns can occur, but the risk is usually lower compared to funds with longer maturities.

Ultra Short Duration Mutual Funds

Ultra short duration funds, a category of debt mutual funds, invest in fixed-income instruments with a portfolio duration typically between three to six months.

These funds aim to offer better returns than liquid funds by taking on slightly higher interest rate and credit risk. However, they still maintain a relatively low sensitivity to interest rate movements compared to longer-duration debt funds. Ultra short duration funds are suitable for investors looking for short-term parking of funds with the potential for moderate returns. The best-performing Ultra Short Duration Funds are listed in the table below for your consideration.

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List of Ultra Short Duration Mutual Funds

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Search Result - 26 Mutual Funds

Fund Name	Fund Size (Cr.)	3Y Returns	5Y Returns	Invest Now
Nippon India Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	12,447	7.58%	6.98%	Invest
Tata Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	6,495	7.51%	6.77%	Invest
Aditya Birla SL Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	18,819	7.49%	6.75%	Invest
AXIS Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	6,074	7.45%	6.77%	Invest
Mirae Asset Ultra Short-Term Fund - Dir Growth Debt Ultra Short Term Fund	2,066	7.43%	6.69%	Invest
DSP Ultra Short Term Fund-Dir Growth Debt Ultra Short Term Fund	4,599	7.42%	6.66%	Invest
ICICI Pru Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	15,974	7.41%	6.76%	Invest
Invesco India Ultra Short Term Fund-Dir Growth Debt Ultra Short Term Fund	1,497	7.34%	6.62%	Invest
UTI-Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	3,348	7.33%	7.19%	Invest
Mahindra Manulife Ultra Short Term Fund-Dir Growth Debt Ultra Short Term Fund	222	7.30%	6.59%	Invest

Fund Name	1Y Returns	Rating	Fund Size (Cr.)
Nippon India Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	7.05% Fund Size (Cr.) - 12,447 Invest
Tata Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	7.06% Fund Size (Cr.) - 6,495 Invest
Aditya Birla SL Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	6.68% Fund Size (Cr.) - 18,819 Invest
AXIS Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	6.85% Fund Size (Cr.) - 6,074 Invest
Mirae Asset Ultra Short-Term Fund - Dir Growth Debt Ultra Short Term Fund	6.75% Fund Size (Cr.) - 2,066 Invest
DSP Ultra Short Term Fund-Dir Growth Debt Ultra Short Term Fund	6.77% Fund Size (Cr.) - 4,599 Invest
ICICI Pru Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	6.76% Fund Size (Cr.) - 15,974 Invest
Invesco India Ultra Short Term Fund-Dir Growth Debt Ultra Short Term Fund	6.81% Fund Size (Cr.) - 1,497 Invest
UTI-Ultra Short Term Fund - Direct Growth Debt Ultra Short Term Fund	6.72% Fund Size (Cr.) - 3,348 Invest
Mahindra Manulife Ultra Short Term Fund-Dir Growth Debt Ultra Short Term Fund	6.66% Fund Size (Cr.) - 222 Invest

What is an Ultra Short Duration Mutual Fund?

Ultra Short Duration Mutual Funds are a category of debt mutual funds that invest in a mix of debt and money market instruments with a Macaulay duration between 1 to 3 years, as defined by SEBI. These funds primarily invest in high-quality corporate bonds, government securities, and other fixed-income instruments. They aim to offer better returns than ultra-short or liquid funds while maintaining moderate risk levels.

Ultra Short Term Funds make investments on money market instruments and debt assets to help the Macaulay. The portfolio of the fund has a duration of three to six months. These funds are therefore perfect for conservative investors with a three to six month investment horizon.

Investors who wish to reach certain financial objectives within six months are the ideal candidates for these funds. These funds typically yield returns in the region of 7 to 9%.

Major Advantages of Ultra Short Duration Fund

1. Better Return Potential (1–3 Years): Short duration funds aim to generate returns that typically outpace traditional options like savings accounts or fixed deposits over a 1 to 3-year investment horizon.
2. Low-to-Moderate Risk Exposure: These funds focus on high-quality debt instruments, which helps balance return expectations with manageable risk—making them appealing to conservative investors.
3. Resilience to Market Fluctuations: Thanks to their shorter maturity profile, these funds tend to be less sensitive to interest rate movements, offering relative stability even in changing market conditions.
4. High Liquidity: Compared to long-term debt funds, short duration funds offer easier access to your capital, providing flexibility without locking in funds for the long haul.
5. Tax Efficiency: For investors holding these funds for over three years, they may benefit from indexation under long-term capital gains tax rules, which can improve post-tax returns.
6. Portfolio Diversification: Investing in a mix of government bonds, corporate debt, and other fixed-income instruments helps reduce concentration risk, contributing to a more balanced investment approach.

How do Ultra Short Duration Mutual Funds Work?

Ultra short duration funds are designed for investors who want a place to park their money for a few months to a year—long enough to earn better returns than a savings account, but without locking funds away. These funds invest in fixed-income securities such as treasury bills, corporate bonds, and certificates of deposit, with maturities typically ranging between 3 to 6 months.

Fund managers aim to strike a balance between generating steady income and managing risk by selecting instruments with low credit risk and relatively short maturities. Since the portfolio is constantly adjusted as securities mature or interest rate expectations shift, the fund remains agile and better equipped to handle short-term interest rate fluctuations.

Interest earned from these investments is passed on to investors, either through appreciation in the fund’s NAV or regular payouts, depending on the plan chosen. Because the underlying instruments mature quickly, the fund can respond faster to changes in market conditions, making it a flexible choice for short-term financial goals or temporary surplus cash.

The primary appeal of ultra short duration funds lies in their ability to offer more attractive yields than traditional banking products, while keeping volatility in check. They work well as part of a conservative fixed-income strategy, especially during uncertain interest rate cycles.

Who Should Invest in Ultra Short Duration Funds?

1. Investors with a 1-3 Year Horizon: Ideal for those looking to park funds for short to medium-term goals.
2. Risk-Averse Investors: Suitable for individuals seeking stable returns with moderate risk.
Alternative to Fixed Deposits: For those seeking better returns than traditional fixed deposits without significantly higher risk.
3. Regular Income Seekers: Investors looking for periodic income through Systematic Withdrawal Plans (SWPs).

If you're looking to park your money safely for a short period, it might be wise to invest in short duration fund options. Many investors invest in short duration fund schemes to benefit from lower interest rate risk and relatively stable returns compared to long-term debt funds.

How to Invest in Ultra Short Duration Funds?

Ultra short duration fund investment through 5paisa is a simple, streamlined process that puts you in control of your money with just a few clicks. Here’s how to get started:

1. Create Your 5paisa Account: Begin by signing up on the 5paisa platform. The registration process is quick, and you can complete it online without visiting a branch.
2. Complete KYC Formalities: Upload your PAN, Aadhaar, and other required documents for KYC verification. 5paisa ensures a fully digital process, so you don’t need to worry about paperwork delays.
3. Explore Fund Options: Once your account is active, head to the mutual fund section and browse through a curated list of ultra-short duration funds. 5paisa offers detailed insights, ratings, and comparisons to help you make an informed choice.
4. Choose How to Invest: Depending on your financial plan, you can either go for a one-time investment or start a SIP (Systematic Investment Plan) directly through the platform. 5paisa allows you to set SIP dates and amounts with complete flexibility.
5. Track and Adjust as Needed: After investing, you can monitor fund performance using 5paisa’s intuitive dashboard. You’ll find tools to track returns, compare funds, and rebalance your portfolio when necessary—all in one place.

By using 5paisa, you not only gain access to top mutual funds but also benefit from a tech-driven platform that simplifies investing without compromising on research or control.

Factors to Consider While Investing in Ultra Short Duration Funds

1. Understand Your Risk Appetite: Before Ultra Short Duration Fund investment, consider how comfortable you are with short-term market fluctuations. While these funds carry relatively low risk, they aren't entirely risk-free—especially in volatile interest rate cycles.
2. Set Realistic Return Expectations: Look at past performance to get a sense of the kind of returns these funds typically deliver. Keep in mind that returns are moderate—not as low as savings accounts, but not as high as long-term equity investments either.
3. Evaluate the Fund Manager’s Track Record: The fund’s performance can be significantly influenced by who's managing it. A seasoned fund manager with a consistent track record adds an extra layer of confidence to your investment decision.
4. Factor in the Expense Ratio: A lower expense ratio means more of your returns stay in your pocket. Compare this cost across similar funds, especially when the return differences are marginal.
5. Match the Fund to Your Financial Goals: If you're looking for a place to park money for a few months to a couple of years—without exposing it to equity market swings—ultra short duration funds can be a solid fit. They're often used by investors to balance out more aggressive investments or to hold surplus funds with better returns than traditional savings.

How Are Ultra Short Duration Funds Taxed?

As per current tax laws, gains from Ultra Short Duration Mutual Funds are taxed based on the investor’s tax slab. From the table below, you can understand in detail how ultra short mutual funds are taxed:

Investment Date	Holding Period	Tax Treatment	Tax Rate
Before April 1, 2023	≥ 24 months	LTCG	12.5% (no indexation)
Before April 1, 2023	< 24 months	STCG	As per income tax slab
On/After April 1, 2023	Any duration	STCG	As per income tax slab

Risks Involved When Investing in Ultra Short Duration Funds

1. Interest Rate Risk: Rising interest rates can lead to a decrease in the value of existing debt instruments. These funds invest in debt instruments with a maturity of 1 to 3 years, ultra short duration fund risks can become significant in a volatile interest rate environment.
2. Credit Risk: Risk of default by the issuers of the debt instruments in the fund's portfolio.
3. Liquidity Risk: Potential difficulty in selling the underlying securities without impacting their price.
4. Reinvestment Risk: Risk that the proceeds from matured investments may be reinvested at lower interest rates.

Popular Ultra Short Duration Mutual Funds

Fund Name
Min Investment Amt
AUM (Cr)
3Y Returns

Ultra Short Duration Mutual Funds

List of Ultra Short Duration Mutual Funds

Category

Sub Category

Rating

What is an Ultra Short Duration Mutual Fund?

Major Advantages of Ultra Short Duration Fund

How do Ultra Short Duration Mutual Funds Work?

Who Should Invest in Ultra Short Duration Funds?

How to Invest in Ultra Short Duration Funds?

Factors to Consider While Investing in Ultra Short Duration Funds

How Are Ultra Short Duration Funds Taxed?

Risks Involved When Investing in Ultra Short Duration Funds

Popular Ultra Short Duration Mutual Funds

Nippon India Ultra Short Term Fund - Direct Growth

₹ 100

₹ 12,447

7.58%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 12,447

3Y Returns

7.58%

Tata Ultra Short Term Fund - Direct Growth

₹ 150

₹ 6,495

7.51%

Min SIP Investment Amt

₹ 150

AUM (Cr.)

₹ 6,495

3Y Returns

7.51%

Aditya Birla SL Ultra Short Term Fund - Direct Growth

₹ 1000

₹ 18,819

7.49%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 18,819

3Y Returns

7.49%

AXIS Ultra Short Term Fund - Direct Growth

₹ 100

₹ 6,074

7.45%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 6,074

3Y Returns

7.45%

Mirae Asset Ultra Short-Term Fund - Dir Growth

₹ 99

₹ 2,066

7.43%

Min SIP Investment Amt

₹ 99

AUM (Cr.)

₹ 2,066

3Y Returns

7.43%

DSP Ultra Short Term Fund-Dir Growth

₹ 100

₹ 4,599

7.42%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 4,599

3Y Returns

7.42%

ICICI Pru Ultra Short Term Fund - Direct Growth

₹ 1000

₹ 15,974

7.41%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 15,974

3Y Returns

7.41%

Invesco India Ultra Short Term Fund-Dir Growth

₹ 1000

₹ 1,497

7.34%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 1,497

3Y Returns

7.34%

UTI-Ultra Short Term Fund - Direct Growth

₹ 500

₹ 3,348

7.33%

Min SIP Investment Amt

₹ 500

AUM (Cr.)

₹ 3,348

3Y Returns

7.33%

Mahindra Manulife Ultra Short Term Fund-Dir Growth

₹ 500

₹ 222

7.30%

Min SIP Investment Amt

₹ 500

AUM (Cr.)

₹ 222

3Y Returns

7.30%

Other Calculators

Frequently Asked Questions

Open Free Demat Account

Ultra Short Duration Mutual Funds

List of Ultra Short Duration Mutual Funds

Category

Sub Category

Rating

What is an Ultra Short Duration Mutual Fund?

Major Advantages of Ultra Short Duration Fund

How do Ultra Short Duration Mutual Funds Work?

Who Should Invest in Ultra Short Duration Funds?

How to Invest in Ultra Short Duration Funds?

Factors to Consider While Investing in Ultra Short Duration Funds

How Are Ultra Short Duration Funds Taxed?

Risks Involved When Investing in Ultra Short Duration Funds

Popular Ultra Short Duration Mutual Funds

Nippon India Ultra Short Term Fund - Direct Growth ₹ 100 ₹ 12,447 7.58% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 12,447 3Y Returns 7.58%

Tata Ultra Short Term Fund - Direct Growth ₹ 150 ₹ 6,495 7.51% Min SIP Investment Amt ₹ 150 AUM (Cr.) ₹ 6,495 3Y Returns 7.51%

Aditya Birla SL Ultra Short Term Fund - Direct Growth ₹ 1000 ₹ 18,819 7.49% Min SIP Investment Amt ₹ 1000 AUM (Cr.) ₹ 18,819 3Y Returns 7.49%

AXIS Ultra Short Term Fund - Direct Growth ₹ 100 ₹ 6,074 7.45% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 6,074 3Y Returns 7.45%

Mirae Asset Ultra Short-Term Fund - Dir Growth ₹ 99 ₹ 2,066 7.43% Min SIP Investment Amt ₹ 99 AUM (Cr.) ₹ 2,066 3Y Returns 7.43%

DSP Ultra Short Term Fund-Dir Growth ₹ 100 ₹ 4,599 7.42% Min SIP Investment Amt ₹ 100 AUM (Cr.) ₹ 4,599 3Y Returns 7.42%

ICICI Pru Ultra Short Term Fund - Direct Growth ₹ 1000 ₹ 15,974 7.41% Min SIP Investment Amt ₹ 1000 AUM (Cr.) ₹ 15,974 3Y Returns 7.41%

Invesco India Ultra Short Term Fund-Dir Growth ₹ 1000 ₹ 1,497 7.34% Min SIP Investment Amt ₹ 1000 AUM (Cr.) ₹ 1,497 3Y Returns 7.34%

UTI-Ultra Short Term Fund - Direct Growth ₹ 500 ₹ 3,348 7.33% Min SIP Investment Amt ₹ 500 AUM (Cr.) ₹ 3,348 3Y Returns 7.33%

Mahindra Manulife Ultra Short Term Fund-Dir Growth ₹ 500 ₹ 222 7.30% Min SIP Investment Amt ₹ 500 AUM (Cr.) ₹ 222 3Y Returns 7.30%

Other Calculators

Frequently Asked Questions

Open Free Demat Account

Nippon India Ultra Short Term Fund - Direct Growth

₹ 100

₹ 12,447

7.58%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 12,447

3Y Returns

7.58%

Tata Ultra Short Term Fund - Direct Growth

₹ 150

₹ 6,495

7.51%

Min SIP Investment Amt

₹ 150

AUM (Cr.)

₹ 6,495

3Y Returns

7.51%

Aditya Birla SL Ultra Short Term Fund - Direct Growth

₹ 1000

₹ 18,819

7.49%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 18,819

3Y Returns

7.49%

AXIS Ultra Short Term Fund - Direct Growth

₹ 100

₹ 6,074

7.45%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 6,074

3Y Returns

7.45%

Mirae Asset Ultra Short-Term Fund - Dir Growth

₹ 99

₹ 2,066

7.43%

Min SIP Investment Amt

₹ 99

AUM (Cr.)

₹ 2,066

3Y Returns

7.43%

DSP Ultra Short Term Fund-Dir Growth

₹ 100

₹ 4,599

7.42%

Min SIP Investment Amt

₹ 100

AUM (Cr.)

₹ 4,599

3Y Returns

7.42%

ICICI Pru Ultra Short Term Fund - Direct Growth

₹ 1000

₹ 15,974

7.41%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 15,974

3Y Returns

7.41%

Invesco India Ultra Short Term Fund-Dir Growth

₹ 1000

₹ 1,497

7.34%

Min SIP Investment Amt

₹ 1000

AUM (Cr.)

₹ 1,497

3Y Returns

7.34%

UTI-Ultra Short Term Fund - Direct Growth

₹ 500

₹ 3,348

7.33%

Min SIP Investment Amt

₹ 500

AUM (Cr.)

₹ 3,348

3Y Returns

7.33%

Mahindra Manulife Ultra Short Term Fund-Dir Growth

₹ 500

₹ 222

7.30%

Min SIP Investment Amt

₹ 500

AUM (Cr.)

₹ 222

3Y Returns

7.30%