6 Mutual Fund Invements Plans for One Year

Last Updated: 18 Oct 2024

Investing in mutual funds for a period of one-year needs a mix of capital safety and liquidity. You basically want to earn stable returns even if it is less than other longer-term investment plans. Obviously, when you talk of 1 year investment horizon, it cannot be an equity fund or even a hybrid fund. Even in debt funds, you cannot go for long term debt holdings since the interest rate risk would be too high in such cases. The options are limited but there still are sufficient choices available.

Here are 6 solid investment options available to mutual fund investors to invest for a period of 1 year.

1. Liquid funds

These are one of the most popular methods of parking short term funds up to one year. These liquid funds typically invest in money market instruments maturing within 90 days. Since the holding period is very short, there is no price risk in these funds and are best suited to park short term monies. Here are some top performing liquid funds in the Indian market.

Scheme Name	NAV Direct	Return 1 Month (%) Direct	Return 3 Month (%) Direct	Return 1 Year (%) Direct
Aditya Birla Sun Life Liquid Fund	342.87	3.69	3.66	3.48
Axis Liquid Fund	2362.39	3.66	3.62	3.46
Baroda BNP Paribas Liquid Fund	2,451.08	3.68	3.66	3.51
BOI AXA Liquid Fund	2,447.36	3.72	3.65	3.46
Canara Robeco Liquid Fund	2,548.13	3.50	3.48	3.35
DSP Liquidity Fund	3,040.88	3.66	3.63	3.45
Edelweiss Liquid Fund	2,745.72	3.59	3.54	3.54
Franklin India Liquid Fund	3,196.67	3.57	3.63	3.46
HDFC Liquid Fund	4,181.65	3.62	3.57	3.43
HSBC Cash Fund	2,118.21	3.60	3.62	3.45

2. Ultra-Short Duration Funds

These funds have also become quite popular as they invest based on duration and not the term to maturity so better suited to maturity matching. The ultra-short duration funds typically invest in debt securities maturing in 3-6 months. Here are some top performing ultra-short Duration Funds.

Scheme Name	Return 1 Month (%) Direct	Return 3 Month (%) Direct	Return 1 Year (%) Direct
Aditya Birla Sun Life Savings Fund	4.54	4.59	4.36
Axis Ultra Short Term Fund	4.74	4.50	4.22
Baroda BNP Paribas Ultra Short Duration Fund	4.30	4.34	4.12
BOI AXA Ultra Short Duration Fund	4.04	3.82	3.53
Canara Robeco Ultra Short Term Fund	3.92	3.64	3.35
DSP Ultra Short Fund	4.28	4.22	3.79
Franklin India Ultra Short Bond Fund	10.37	8.73	12.28
HDFC Ultra Short Term Fund	4.33	4.13	3.99
HSBC Ultra Short Duration Fund	4.18	4.06	3.86
ICICI Prudential Ultra Short Term Fund	4.17	4.40	4.55

3. Low Duration Funds

The low duration funds are again funds that invest in securities based on duration. They invest in securities with a duration of 6-12 months. These are also ideally suited to parking of funds of up to 1 year time frame. Here are some top performing low duration funds.

IDFC Low Duration Fund

Scheme Name	NAV Direct	Return 1 Month (%) Direct	Return 3 Month (%) Direct	Return 1 Year (%) Direct
Aditya Birla Sun Life Low Duration	577.59	5.74	4.86	4.78
Axis Treasury Advantage Fund	2,587.15	5.45	4.52	4.35
Baroda BNP Paribas Low Duration	35.14	4.06	4.76	4.48
Canara Robeco Savings Fund	34.81	3.88	3.88	3.66
DSP Low Duration Fund	16.44	4.38	4.22	4.04
Franklin India Low Duration Fund	28.09	29.00	14.44	18.12
HDFC Low Duration Fund	49.73	5.13	4.19	4.62
HSBC Low Duration Fund	17.92	4.24	4.36	4.31
ICICI Prudential Savings Fund	436.87	6.75	2.97	4.06
IDFC Low Duration Fund	31.83	3.84	4.05	3.97

4. Money Market Funds

These money market funds typically invest in money market instruments with maturity up to 1 year. Most money market are very liquid and are low on risk. Hence there is no credit risk unlike duration funds that have some credit risk. Here are some top performers.

Scheme Name	NAV Direct	Return 1 Month (%) Direct	Return 3 Month (%) Direct	Return 1 Year (%) Direct
Aditya Birla Sun Life Money Manager	298.62	4.45	4.36	4.09
Axis Money Market Fund	1,150.64	4.68	4.40	4.05
Baroda BNP Paribas Money Market	1,128.24	3.63	4.02	3.47
DSP Savings Fund	43.72	4.48	3.89	4.00
Edelweiss Money Market Fund	25.25	4.19	3.94	3.78
Franklin India Savings Fund	41.45	4.11	3.89	3.86
HDFC Money Market Fund	4,649.96	4.53	4.23	4.05
ICICI Prudential Money Market Fund	306.58	4.66	4.11	3.93
IDFC Money Manager Fund	34.88	4.29	4.12	3.76
Invesco India Money Market Fund	2,537.87	4.32	3.97	3.94

5. Floater funds

These floater funds are debt funds that invest at least 65% of their money in floating-rate bonds. The interest these bonds pay change as the interest rates in the economy change. A periodic resetting of rates to keep them in sync with market rates. Such funds are best suited for short term when interest rates are rising. Here are some top performers.

Scheme Name	NAV Direct	Return 1 Year (%) Direct
Aditya Birla Sun Life Floating Rate Fund	283.11	4.76
DSP Floater Fund	10.50	4.48
Franklin India Floating Rate Fund	34.57	4.04
HDFC Floating Rate Debt Fund	40.06	4.72
ICICI Prudential Floating Interest Fund	359.83	4.39
IDFC Floating Rate Fund	10.46	4.35
Kotak Floating Rate Fund	1,225.05	6.12
Nippon India Floating Rate Fund	37.71	5.00
SBI Floating Rate Debt Fund	10.64	4.23
UTI Floater Fund	1,257.02	4.04

6. Arbitrage funds

Arbitrage fund is a type of mutual fund that leverages the price differential in the cash and derivatives market to generate returns. The returns are dependent on the volatility of the asset. They are classified as hybrid funds but are actually akin to debt funds. They are quite popular for short term parking up to 1 year. Here are top performing arbitrage funds.

Scheme Name	NAV Direct	Return 1 Year (%) Direct	Return 3 Year (%) Direct	Return 5 Year (%) Direct
Aditya Birla Sun Life Arbitrage Fund	22.74	4.58	5.19	5.72
Axis Arbitrage Fund	16.17	4.82	5.23	5.83
Baroda BNP Paribas Arbitrage Fund	13.54	4.38	5.24	5.82
BOI AXA Arbitrage Fund	11.78	2.96	3.99
DSP Arbitrage Fund	12.47	4.20	4.99
Edelweiss Arbitrage Fund	16.47	4.74	5.42	5.93
HDFC Arbitrage Fund	16.07	4.26	4.80	5.33
ICICI Prudential Equity Arbitrage Fund	29.27	4.49	5.09	5.67
IDFC Arbitrage Fund	27.90	4.38	5.02	5.69
Indiabulls Arbitrage Fund	15.22	3.08	4.16	4.97

Investors can take a pick based on the ones best suited to risk appetite.

Factors To Consider Before Investing In Funds For 1 Year

You can’t impulsively invest for a duration of 12 months. Before doing that, you must keep an eye on multiple factors. 

Investment Goals and Risk Tolerance

Understanding your investment goals is essential. Are you looking for capital preservation, income generation, or growth? This will guide your choice of funds. Additionally, assess your risk tolerance. If you prefer to avoid volatility, you might lean towards safer investment options, such as fixed deposits or government bonds, which provide more stability compared to equities.

Types of Investment Plans

When selecting an investment plan, consider the duration and liquidity of your investment. For a one-year horizon, you may want to explore short-term investment options that offer a balance between risk and return. Options like money market funds and high-yield savings accounts can provide reasonable returns with lower risk, making them suitable for short-term investors.

One-Time Investment Plans

If you prefer a more straightforward approach, a one-time investment plan might be ideal. This involves making a single lump-sum investment rather than regular contributions. This method can be beneficial if you have a specific amount of capital available and want to avoid the complexities of managing multiple transactions over time. Ensure that the chosen investment vehicle aligns with your risk profile and offers liquidity when needed.

Safe Investment Options

For those prioritizing capital preservation, safe investment options are crucial. Instruments such as fixed deposits and certain bonds offer lower risk and can safeguard your principal while providing modest returns. These options are particularly appealing in uncertain market conditions, as they help mitigate potential losses.

Market Conditions and Economic Outlook

Consider the current market conditions and economic outlook. Interest rates, inflation, and overall market sentiment can impact the performance of your investments. For instance, in a rising interest rate environment, fixed-income investments may yield lower returns. Therefore, staying informed about economic indicators can help you make more informed investment decisions.

Diversification

It is a key strategy to manage risk. Even within a short-term investment horizon, spreading your funds across different asset classes can help mitigate potential losses. A well-diversified portfolio can include a mix of equities, fixed-income securities, and cash equivalents tailored to your risk tolerance and investment objectives.

Frequently Asked Questions

What is a good investment return over 1 year?

A good investment return over one year typically ranges from 5% to 10%, depending on the market conditions and the specific investment plan chosen. Short-term investments like high-yield savings accounts or certificates of deposit may yield lower returns but are more stable compared to riskier assets.

What is the safest investment?

Safe investment options include high-yield savings accounts and money market funds. These options allow investors to preserve their capital with minimal risk, making them ideal for those seeking stability and lower volatility in their investment portfolios.

Where to invest money without risk?

To invest money without risk, consider safe investment options such as fixed deposits or government bonds. These instruments provide guaranteed returns and protect your principal amount, making them suitable for conservative investors who prioritize capital preservation over high returns.

Which investment is best in future?

For future investments, growth stocks and equity mutual funds are often considered the best investment options. They offer the potential for high returns over the long term, though they come with higher risk. Investors should assess their risk tolerance before committing to these types of investments.

What is the most successful investment?

It typically involves a diversified portfolio that includes a mix of asset classes. This approach minimizes risk while maximizing potential returns. A one-time investment plan in well-researched stocks or index funds can also lead to significant long-term gains if managed wisely.