Cash and Short Duration Strategies
- Suitable For
These strategies are ideal for individuals who are looking at investing funds for very short duration but want better than savings account interest.
This could be because of any of the following reasons
Options in this category include
- Next month's EMI payment
- Contingency funds
- Waiting for a good deal to buy a house
- Cash Funds: Very short duration funds , from 1 day to 30 days investment horizon
Cash funds invest in call money markets. Call money markets is used by Reserve bank of India (RBI), banks, insurance companies and mutual funds and very large corporates to borrow and lend money from overnight ( 1day) to 15 day period.
- Ultra Short Term Funds: Short duration funds , from 1 week to 3 months investment horizon
Ultra short term funds invest in Treasury bills from RBI, Certificate of deposits of banks and Commercial paper of very large corporates.
- Arbitrage funds: ideal for Investment horizon from 3 months to 5 months
Arbitrage funds generate returns from price discrepancy between equity prices in cash and derivatives segment. They don't take equity market exposure so they are very safe. Also as they are equity based funds, taxation on these funds is lower than on debt funds.