ultra short term Vs short term??

POSTED BY Ajinkya Darshane ON February 16, 2013 6:15 pm COMMENTS (9)

I am quite confused these days as far as the short term investment planning is concerned, there are lot of investment vehicles and they are so similar in nature that I often get confused between picking and choosing one,lets discuss one by one in each thread, Its my humble request to all financial planners, experts to throw some light on this –


ultra short term funds – they are usually recommended when the horizon is between 3 to 6 months

short term funds – they are usually recommended when the horizon is about a year


both generate returns of similar spectrum, lets see an interesting stats 


short term fund – 1 year return- top performer – UTI-short term regular – 10.64%

ultra short term fund – 1 year return – top performer – birla sunlife short term oppo – 11.4%


the returns are similar, as i was going through list of ultra funds, i found that they have performer better in the duration of 1 year, 


so on what parameters i should select these funds?? their exit loads? returns? or something else, how to find optimum use of a investment vehicle with the underline risk it posesses??




9 replies on this article “ultra short term Vs short term??”

  1. Dear Ajinkya, with all due respect to KBC & Sr. Bachchan.


    So no question is stupid. 🙂



  2. Ajinkya Darshane says:

    thanx a lot for clearing my doubt ashal and FFC ! this is one forum where i can ask my stupid questions fearlessly!

  3. Dear Ajinkya, when ‘ll you invest in a short term of ultra short fund? When the goal for which you were saving since long is in striking distance. So as already told by dear FFC, the term of our goal should match with the underlying assets’ maturity time.



  4. Ajinkya Darshane says:

    thanx, ashal & free financial calculators

    – I agree with both of u, but 6 months difference in time frame is very volatile time period,
    but my concern was, short and ultra short, these funds have been already compartmentalized by these two terms. is this a true picture of things? that’s all what i wanted to ask…and in general should we follow the trivial compartmentalization of funds while investing?

    1. in general the maturity of the underlying paper in the debt fund should match the investment time frame.

      6 months is volatile only if maturity period is much longer than this.

      For periods less than a year liquids funds are great in all aspects: risk, tax, liquidity, exit load.

  5. A google search for “How to choose a debt fund” provides a lot of food for thought. I have read most of them. The above opinion has remained unchanged before and after reading.

  6. Dear Ajinkya, the Ultra short term funds are meant for 3-6 months time frame, where as short term are meant for around 9-12 months period. Now while comparing you are checking the 1Y return, which should not be done at all. The reason is simple – the time frame of your holding should be the parameter to opt the fund. Just for sake of discussion, if Long term return from Short term funds are in the range of 9% or more, ‘ll you invest for 5-7-10 years into short term funds or ion to long term debt funds or balanced fund or Eq. funds?

    Please do not compare the generated returns in isolation. there is more to it, the debt funds have performed good in the last one year on riding the interest wave. Once the interest rates ‘ll fall, the return ‘ll not be the same 10-11%….. Please keep this point also in mind. 🙂



  7. Ajinkya Darshane says:

    I had the same view earlier, but i would like to reject that investment vehicle after having enough knowledge about it, i know there are better and safe alternatives available, but I am also asking this to widen my knowledge base so that hence forth i can choose or reject it myself..I got ur point, but this question is more of a knowledge requirement than an investment related query..

  8. For such short terms returns are not important at all. So is compounding and so is inflation. The only things that matter are protection of principal, tax-outgo and exit loads.

    So you need to minimize risk. For terms less than one year I will simply go with liquid funds which is the safest debt fund. If I want to be even sure I will simply lock-into a RD. Safety takes precedence over tax.

    No need to break your head over investments for such short durations.

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