Not RDs or savings account, short-term funds can help you with short-term expenses

Short-term financial goals require as much careful planning and regular investment. The difference is the time you stay invested.

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Whenever we talk about "investment" it is generally looked as a long-term one as nobody discusses the investment for short-term.

Whether it is mutual funds, equities or any other financial instrument, most of the financial planning is done for long-term goals.

But what about short-term expenses? Should that be ignored? Here comes Short-term funds into picture.

Short-term financial goals require as much careful planning and regular investment. The difference is the time you stay invested.

People who have regular income or monthly income, save for short term goals via Recurring Deposits (RDs) or simply by accumulation money in savings account.

Amol Joshi of PlanRupee said, "Mutual funds have a product with similar characteristics - liquid or Ultra short term funds. These funds have no equity exposure, very less interest rate volatility and no lock-in period or exit load. Many liquid funds help you save money via a smart-phone application as well. You can save/invest via a click on your smart-phone and amount can be redeemed too, via an app. Using liquid funds in such a convenient manner can be effectively used to plan and meet short term goals."

Mutual funds are not only the easiest way to invest in the market, they are also among the most secure and have the potential to yield the highest returns. If you are looking at mutual funds, entering the industry via Systematic Investment Plan (SIPs).

Ajit Narasimhan, Category Head - Savings and Investments, BankBazaar.com said, "You can take the SIP route not only for long-term investments but also short-term ones. You can invest in short-term and ultra-short-term debt funds, liquid funds, etc. through an SIP."

Ultra short term funds, also known as liquid plus funds, are the new popular investment option which investors can benefit from, due to their growing interest rates.

Ultra short term funds are basically those funds which allow you to invest in fixed-income instruments which are characterized by a very short maturity period and easy liquidity. These instruments carry a far lower interest risk as compared to long term investments.

Ultra short term debt funds will ordinarily yield annualized returns between the rates of 4.5% to 7%. If you, as an investor, are looking to invest in ultra short term debt funds for a time frame that is below a year, then, it is advised that you opt for the dividend option. This will help ensure that you receive better post-tax returns.

So, do not think mutual funds as only long-term option, invest for meeting short-term goals too.

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