It is heartening to see an ever increasing number of investors adopting a disciplined investment approach through SIP for investing in mutual funds. However, while equity and equity-oriented balanced funds have caught the fancy of investors, many other categories of funds that have the potential to help them achieve a number of short and medium term goals as well as keep their asset allocation within their comfort zone have not got their due.
Investors can benefit tremendously by including them in their portfolio. Here are some of these categories of funds and how they can benefit investors:
Liquid Funds: Liquid funds invest in securities with a residual maturity of not more than 91 days. Investments are mostly made in money market instruments. These funds are suitable for investors who intend to park money for a short period, i.e. from a few days to a few months, and hope to earn returns better than those from savings bank accounts.
Ultra Short-Term Income Funds : Ultra short-term income funds are positioned between a liquid fund and a short-term income fund. These funds seek to provide a high degree of liquidity along with generation of reasonable returns by investing in a portfolio consisting of short-term debt and money market instruments. These funds are suitable for investors who wish to invest for a period of around 3 to 12 months and seek to earn higher returns than liquid funds without compromising on a higher level of liquidity.
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