Riya-Equity mutual funds are meant for long term investment. Personally I feel anything less than 5 years is shorr term, 5-10 years medium term and 10+ years as a long term. Debt funds are good tax efficient only in case your holding period is more than 3 years. But in your case you specifically mentioned 3 years. Hence, considering the volatility and tax efficiency, I suggested Bank RDs over debt or equity mutual funds.