Investors should look at expense ratio (TER), duration and credit quality of a short term fund before investing. Higher TER will impact scheme returns and hence lower TER is preferable. Longer the duration of a fund, more sensitive (volatile) it will be to interest rate changes. You should select funds according to your risk appetite. Credit quality is one of the most important factors to be considered when investing in short term funds. Though lower rated bonds give higher yields, the risk of making a loss is also higher. You should try to invest in funds with high credit quality.