Features of Ultra Short-Term Mutual Funds
1. Timeframe: The standout feature of USTMFs lies in their focus on short timeframes. Typically the securities held in these funds have a maturity ranging from 3 to 6 months. This shorter duration helps minimise the impact of interest rate fluctuations offering stability compared to funds with investment periods.
2. Lower Risk: USTMFs are specifically designed as low-risk investment options. Their primary investments revolve around high-quality debt instruments and money market securities. With credit quality, there is reduced risk associated with these investments.
3. Easy Access: One significant advantage for investors is the level of liquidity offered by USTMFs. Whether you suddenly need access to your funds for expenses or want to seize an investment opportunity USTMFs allow you to redeem your units without enduring lengthy waiting periods or facing financial penalties.
4. Returns: While USTMFs adopt a conservative approach they strive to deliver slightly higher returns compared to traditional savings accounts. These returns stem mainly from interest income generated by the underlying securities along, with capital appreciation.
5. Expense Ratio: Investors often take the expense ratio into account when assessing funds. USTMFs generally have expense ratios, which means that the cost of managing the fund is kept to a minimum. This benefits investors because it ensures that a larger portion of the funds returns is passed on to them.
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