+91-22-48913909Short Term Debt Funds or Short Duration Funds
As the name suggests, Short term debt funds, also known as short duration funds, are typically Debt Mutual Funds that invest money for a short duration, usually less than 3 years. Also known as Short Term Income Funds, Short term debt funds invest in debt instruments and money market instruments that include Bank papers (also called Certificate of Deposits), government papers(G-secs) and commercial papers (CPs). This Mutual Fund scheme is suitable for investors who prioritise Capital preservation, but also wish to invest for a predominantly longer period to earn good returns over the long term (between 1-3 years). Investors who are willing to invest for a short duration of 1-3 years can look at short term bond funds. Short term debt products can benefit from the interest Accruals in the debt Portfolio and from the tactical exposure to higher duration debt by the respective fund manager.
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Features of Short Duration (Short-Term) Debt Funds
Some of the prominent features of short term funds are:
Liquidity
The short term debt funds are highly liquid as the maturity period is short and the investments avenues allow liquidity. Usually, there are no entry and exit loads charged on these funds. However, some short term debt funds do charge an exit load if the exit is made in a few months. So, the investors are suggested to invest wisely considering all the parameters.
Returns
When it comes to investing in Mutual Funds, returns are what people actually look for. However, this should not be the only parameter while choosing a best short term Debt fund to invest. In the recent reports, RBI stated that the investors would earn better returns by Investing in short to mid-term funds that invest in instruments having a maturity between of one to five years. Generally, the fund managers handling such funds prefer investing in high credit rating securities. Thus, ensuring the least possibility of Default by the issuers providing safety to investors’ capital. Currently, short term debt funds with a maturity period of one-three years give annualised returns of 9-10% p.a. Investors should not just chase returns, but also look at the credit quality of the portfolio. If you are a conservative investor then it makes sense to ensure that give away some returns for the extra safety.
Interest Rate Risk
Given the short term nature of these funds, the returns are not much affected by Inflation and there is a lesser interest rate risk. Typically, short term debt funds generate income from the interest earned on short to medium term Bonds. This accrual income, meaning the accumulated interest, gets added to the Net Asset Value and becomes your final return. Since you know these funds provide steady income, therefore, the returns are less volatile as compared to other long-term income funds. Some short term funds do carry a bit of interest rate risk, this can be measured by a parameter called duration of the portfolio. One can even look at the average maturity of the portfolio. Both these parameters are available on the fact sheets of the scheme. Just remember a simple rule, higher the duration or maturity higher the interest rate risk! If interest rates fall, then this is positive, however, if rates rise, then the returns would be negatively impacted.
Investment Horizons
Short term debt funds do not invest in instruments that have a very long maturity as they try to maintain lower interest rate risk and offer better tax-adjusted returns. Since these funds provide stable returns in a time period of one to three years, investors should try to match the investment timeline with the average maturity of the fund. The instruments they invest in include money Market instruments like bonds, Commercial Paper and certificate of deposits etc.
Active Management Required
Being a short term investment, these funds do not require heavy active management by the fund manager. Once the portions of the portfolio are allotted, the need of actively managing (buying and selling units) the investments is lower, having said this the fund manager needs to ensure that interest rate views are incorporated and he/she is vigilant on the credit quality of the portfolio as well as new opportunities. Their aim to provide steady returns is achieved by ensuring regular active management of the fund.
Dividend Payout
Short term debt funds also offer an option of dividend payout. With this option, the investors can get dividends at regular interval mostly monthly and fortnightly. However, the dividends paid by these funds attract a DDT (Dividend Distribution Tax) of 25% for individual investors.
Benefits of Short Duration (Short-Term) Funds
- The short term bond funds have a shorter maturity so they generally offer safe and stable returns.
- The fluctuations in interest rates of the debt market have a marginal to the insignificant effect on the returns of short term debt funds.
- Being sensitive to changing the interest rate, short term bond funds usually perform better than other funds who are affected by the market fluctuations.
- The liquidity of these funds is high. So, the investors can easily withdraw their investment in case of emergencies.
- Typically, most of the best short term debt funds do not charge any fee for withdrawal. So, there is minimal to no exit load.
- Short term debt funds are tax efficient. The tax charged on the interest of these funds is much less than that of fixed bank deposits.
Top Short Duration (Short-Term) Debt Funds 2025
Some of the best short term debt funds include-
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Sundaram Short Term Debt Fund Growth ₹36.3802
↑ 0.01 ₹362 0.8 11.4 12.8 5.3 4.52% 1Y 2M 13D 1Y 7M 3D Axis Short Term Fund Growth ₹31.4946
↑ 0.03 ₹12,129 1.3 3.9 8.5 7.7 8 6.89% 2Y 5M 23D 3Y 2M 12D Nippon India Short Term Fund Growth ₹53.7658
↑ 0.07 ₹8,935 1.2 3.8 8.3 7.7 8 7.04% 2Y 6M 18D 3Y 2M 19D SBI Short Term Debt Fund Growth ₹32.7076
↑ 0.04 ₹16,387 1.2 3.7 8.2 7.6 7.7 7.02% 2Y 9M 14D 3Y 5M 26D ICICI Prudential Short Term Fund Growth ₹61.2335
↑ 0.04 ₹22,339 1.3 3.7 8.2 7.8 7.8 7.27% 2Y 7M 10D 4Y 10M 20D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Dec 21 Research Highlights & Commentary of 5 Funds showcased
Commentary Sundaram Short Term Debt Fund Axis Short Term Fund Nippon India Short Term Fund SBI Short Term Debt Fund ICICI Prudential Short Term Fund Point 1 Bottom quartile AUM (₹362 Cr). Lower mid AUM (₹12,129 Cr). Bottom quartile AUM (₹8,935 Cr). Upper mid AUM (₹16,387 Cr). Highest AUM (₹22,339 Cr). Point 2 Oldest track record among peers (23 yrs). Established history (15+ yrs). Established history (22+ yrs). Established history (18+ yrs). Established history (23+ yrs). Point 3 Rating: 2★ (bottom quartile). Rating: 3★ (lower mid). Top rated. Rating: 3★ (bottom quartile). Rating: 4★ (upper mid). Point 4 Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderate. Point 5 1Y return: 12.83% (top quartile). 1Y return: 8.48% (upper mid). 1Y return: 8.30% (lower mid). 1Y return: 8.17% (bottom quartile). 1Y return: 8.15% (bottom quartile). Point 6 1M return: 0.20% (bottom quartile). 1M return: 0.75% (lower mid). 1M return: 0.86% (top quartile). 1M return: 0.78% (upper mid). 1M return: 0.69% (bottom quartile). Point 7 Sharpe: 0.98 (bottom quartile). Sharpe: 1.56 (top quartile). Sharpe: 1.26 (lower mid). Sharpe: 1.26 (bottom quartile). Sharpe: 1.43 (upper mid). Point 8 Information ratio: 0.00 (top quartile). Information ratio: 0.00 (upper mid). Information ratio: 0.00 (lower mid). Information ratio: 0.00 (bottom quartile). Information ratio: 0.00 (bottom quartile). Point 9 Yield to maturity (debt): 4.52% (bottom quartile). Yield to maturity (debt): 6.89% (bottom quartile). Yield to maturity (debt): 7.04% (upper mid). Yield to maturity (debt): 7.02% (lower mid). Yield to maturity (debt): 7.27% (top quartile). Point 10 Modified duration: 1.20 yrs (top quartile). Modified duration: 2.48 yrs (upper mid). Modified duration: 2.55 yrs (lower mid). Modified duration: 2.79 yrs (bottom quartile). Modified duration: 2.61 yrs (bottom quartile). Sundaram Short Term Debt Fund
Axis Short Term Fund
Nippon India Short Term Fund
SBI Short Term Debt Fund
ICICI Prudential Short Term Fund
Short Duration funds having AUM/Net Assets above 100 Crore. Sorted on Last 1 Year Return.
(Erstwhile Sundaram Select Debt Short Term Asset Fund) To earn regular income by investing primarily in fixed income
securities, which may be paid as dividend or reinvested at
the option of the investor. A secondary objective is to
attempt to keep the value of its units reasonably stable. Below is the key information for Sundaram Short Term Debt Fund Returns up to 1 year are on To generate stable returns with a low risk strategy while maintaining liquidity through a portfolio comprising of debt and money market instruments. However, there can be no assurance that the investment objective of the scheme will be achieved. Research Highlights for Axis Short Term Fund Below is the key information for Axis Short Term Fund Returns up to 1 year are on The primary investment objective of the scheme is to generate stable returns for investors with a short term investment horizon by investing in fixed income
securitites of a short term maturity. Research Highlights for Nippon India Short Term Fund Below is the key information for Nippon India Short Term Fund Returns up to 1 year are on To provide investors with an opportunity to generate regular income through investments in a portfolio comprising of debt instruments which are rated not below investment grade by a credit rating agency,
and money market instruments. Research Highlights for SBI Short Term Debt Fund Below is the key information for SBI Short Term Debt Fund Returns up to 1 year are on To generate income through investments in a range of debt and money market instruments of various maturities with a view to maximising income while maintaining the optimum balance of yield, safety and liquidity. Research Highlights for ICICI Prudential Short Term Fund Below is the key information for ICICI Prudential Short Term Fund Returns up to 1 year are on 1. Sundaram Short Term Debt Fund
Sundaram Short Term Debt Fund
Growth Launch Date 5 Sep 02 NAV (31 Dec 21) ₹36.3802 ↑ 0.01 (0.03 %) Net Assets (Cr) ₹362 on 30 Nov 21 Category Debt - Short term Bond AMC Sundaram Asset Management Company Ltd Rating ☆☆ Risk Moderately Low Expense Ratio 0.96 Sharpe Ratio 0.98 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 250 Exit Load NIL Yield to Maturity 4.52% Effective Maturity 1 Year 7 Months 3 Days Modified Duration 1 Year 2 Months 13 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 20 ₹10,000 30 Sep 21 ₹11,364 Returns for Sundaram Short Term Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21 Duration Returns 1 Month 0.2% 3 Month 0.8% 6 Month 11.4% 1 Year 12.8% 3 Year 5.3% 5 Year 5.6% 10 Year 15 Year Since launch 6.9% Historical performance (Yearly) on absolute basis
Year Returns 2024 2023 2022 2021 2020 2019 2018 2017 2016 2015 Fund Manager information for Sundaram Short Term Debt Fund
Name Since Tenure Data below for Sundaram Short Term Debt Fund as on 30 Nov 21
Asset Allocation
Asset Class Value Debt Sector Allocation
Sector Value Credit Quality
Rating Value Top Securities Holdings / Portfolio
Name Holding Value Quantity 2. Axis Short Term Fund
Axis Short Term Fund
Growth Launch Date 22 Jan 10 NAV (03 Oct 25) ₹31.4946 ↑ 0.03 (0.11 %) Net Assets (Cr) ₹12,129 on 31 Aug 25 Category Debt - Short term Bond AMC Axis Asset Management Company Limited Rating ☆☆☆ Risk Moderately Low Expense Ratio 0.88 Sharpe Ratio 1.56 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.89% Effective Maturity 3 Years 2 Months 12 Days Modified Duration 2 Years 5 Months 23 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 20 ₹10,000 30 Sep 21 ₹10,514 30 Sep 22 ₹10,803 30 Sep 23 ₹11,515 30 Sep 24 ₹12,437 30 Sep 25 ₹13,473 Returns for Axis Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21 Duration Returns 1 Month 0.8% 3 Month 1.3% 6 Month 3.9% 1 Year 8.5% 3 Year 7.7% 5 Year 6.2% 10 Year 15 Year Since launch 7.6% Historical performance (Yearly) on absolute basis
Year Returns 2024 8% 2023 6.8% 2022 3.7% 2021 3.5% 2020 10.1% 2019 9.8% 2018 6.3% 2017 5.9% 2016 9.6% 2015 8.1% Fund Manager information for Axis Short Term Fund
Name Since Tenure Devang Shah 5 Nov 12 12.83 Yr. Aditya Pagaria 3 Jul 23 2.17 Yr. Data below for Axis Short Term Fund as on 31 Aug 25
Asset Allocation
Asset Class Value Cash 8.21% Debt 91.54% Other 0.25% Debt Sector Allocation
Sector Value Corporate 62.94% Government 27.48% Cash Equivalent 6.84% Securitized 2.48% Credit Quality
Rating Value AA 12.8% AAA 87.2% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.79% Govt Stock 2034
Sovereign Bonds | -3% ₹427 Cr 42,126,700
↓ -32,000,000 7.54% Bihar State Development Loans (03/09/2033)
Sovereign Bonds | -3% ₹354 Cr 35,000,000
↑ 35,000,000 National Bank For Agriculture And Rural Development
Debentures | -3% ₹319 Cr 31,500 National Bank For Agriculture And Rural Development
Debentures | -2% ₹254 Cr 25,000
↑ 18,500 Power Finance Corporation Limited
Debentures | -2% ₹248 Cr 25,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹233 Cr 23,000
↑ 5,000 Indigrid Infrastructure Trust
Debentures | -2% ₹193 Cr 19,000 Tata Capital Limited
Debentures | -1% ₹177 Cr 1,750 Tata Capital Housing Finance Limited
Debentures | -1% ₹150 Cr 15,000 Kotak Mahindra Prime Limited
Debentures | -1% ₹150 Cr 15,000
↑ 15,000 3. Nippon India Short Term Fund
Nippon India Short Term Fund
Growth Launch Date 18 Dec 02 NAV (03 Oct 25) ₹53.7658 ↑ 0.07 (0.12 %) Net Assets (Cr) ₹8,935 on 31 Aug 25 Category Debt - Short term Bond AMC Nippon Life Asset Management Ltd. Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.94 Sharpe Ratio 1.26 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 100 Exit Load NIL Yield to Maturity 7.04% Effective Maturity 3 Years 2 Months 19 Days Modified Duration 2 Years 6 Months 18 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 20 ₹10,000 30 Sep 21 ₹10,619 30 Sep 22 ₹10,860 30 Sep 23 ₹11,583 30 Sep 24 ₹12,518 30 Sep 25 ₹13,537 Returns for Nippon India Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21 Duration Returns 1 Month 0.9% 3 Month 1.2% 6 Month 3.8% 1 Year 8.3% 3 Year 7.7% 5 Year 6.3% 10 Year 15 Year Since launch 7.7% Historical performance (Yearly) on absolute basis
Year Returns 2024 8% 2023 6.8% 2022 3.2% 2021 4.4% 2020 9.5% 2019 9.4% 2018 5.5% 2017 5.7% 2016 9.8% 2015 8.1% Fund Manager information for Nippon India Short Term Fund
Name Since Tenure Vivek Sharma 1 Feb 20 5.59 Yr. Kinjal Desai 25 May 18 7.28 Yr. Sushil Budhia 31 Mar 21 4.42 Yr. Data below for Nippon India Short Term Fund as on 31 Aug 25
Asset Allocation
Asset Class Value Cash 5.32% Debt 94.42% Other 0.26% Debt Sector Allocation
Sector Value Corporate 50.14% Government 42.42% Securitized 4.8% Cash Equivalent 2.38% Credit Quality
Rating Value AA 10.93% AAA 89.07% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.32% Govt Stock 2030
Sovereign Bonds | -6% ₹500 Cr 48,000,000 7.02% Govt Stock 2031
Sovereign Bonds | -4% ₹391 Cr 38,000,000
↓ -2,000,000 7.17% Govt Stock 2030
Sovereign Bonds | -3% ₹300 Cr 29,000,000
↓ -1,000,000 07.17 KA Sdl 2030
Sovereign Bonds | -3% ₹253 Cr 25,000,000
↑ 25,000,000 07.93 Up SDL 2030
Sovereign Bonds | -3% ₹234 Cr 22,500,000
↑ 12,500,000 Shivshakti Securitisation Trust**
Unlisted bonds | -3% ₹225 Cr 225
↑ 225 7.17 Madhya Pradesh SDL 2031
Sovereign Bonds | -2% ₹206 Cr 20,500,000 Aditya Birla Housing Finance Limited
Debentures | -2% ₹203 Cr 20,000 Siddhivinayak Securitisation Trust**
Unlisted bonds | -2% ₹200 Cr 200
↑ 200 National Bank For Agriculture And Rural Development
Debentures | -2% ₹173 Cr 17,000
↓ -5,000 4. SBI Short Term Debt Fund
SBI Short Term Debt Fund
Growth Launch Date 27 Jul 07 NAV (03 Oct 25) ₹32.7076 ↑ 0.04 (0.11 %) Net Assets (Cr) ₹16,387 on 31 Aug 25 Category Debt - Short term Bond AMC SBI Funds Management Private Limited Rating ☆☆☆ Risk Moderately Low Expense Ratio 0.84 Sharpe Ratio 1.26 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 7.02% Effective Maturity 3 Years 5 Months 26 Days Modified Duration 2 Years 9 Months 14 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 20 ₹10,000 30 Sep 21 ₹10,475 30 Sep 22 ₹10,721 30 Sep 23 ₹11,449 30 Sep 24 ₹12,334 30 Sep 25 ₹13,320 Returns for SBI Short Term Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21 Duration Returns 1 Month 0.8% 3 Month 1.2% 6 Month 3.7% 1 Year 8.2% 3 Year 7.6% 5 Year 5.9% 10 Year 15 Year Since launch Historical performance (Yearly) on absolute basis
Year Returns 2024 7.7% 2023 6.7% 2022 3.5% 2021 2.8% 2020 9.9% 2019 9.5% 2018 6% 2017 5.7% 2016 9.9% 2015 8.2% Fund Manager information for SBI Short Term Debt Fund
Name Since Tenure Mansi Sajeja 1 Dec 23 1.75 Yr. Data below for SBI Short Term Debt Fund as on 31 Aug 25
Asset Allocation
Asset Class Value Cash 8.32% Debt 91.41% Other 0.27% Debt Sector Allocation
Sector Value Corporate 63.81% Government 27.19% Securitized 4.5% Cash Equivalent 4.23% Credit Quality
Rating Value AA 12.64% AAA 87.36% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.33% Govt Stock 2035
Sovereign Bonds | -5% ₹840 Cr 85,000,000
↓ -15,000,000 7.17% Govt Stock 2030
Sovereign Bonds | -4% ₹682 Cr 66,000,000 6.79% Govt Stock 2034
Sovereign Bonds | -4% ₹660 Cr 65,000,000 National Bank For Agriculture And Rural Development
Debentures | -3% ₹507 Cr 50,000 Rec Limited
Debentures | -3% ₹507 Cr 50,000 08.32 RJ Sdl 2029
Sovereign Bonds | -3% ₹471 Cr 45,000,000 TATA Communications Limited
Debentures | -2% ₹403 Cr 40,000 Shivshakti Securitisation Trust (Obligor - Digital Fibre Infrastructure Tru
Unlisted bonds | -2% ₹375 Cr 375
↑ 375 Siddhivinayak Securitisation Trust (Obligor - Digital Fibre Infrastructure
Unlisted bonds | -2% ₹375 Cr 375
↑ 375 National Bank For Agriculture And Rural Development
Debentures | -2% ₹373 Cr 37,500 5. ICICI Prudential Short Term Fund
ICICI Prudential Short Term Fund
Growth Launch Date 25 Oct 01 NAV (03 Oct 25) ₹61.2335 ↑ 0.04 (0.07 %) Net Assets (Cr) ₹22,339 on 15 Sep 25 Category Debt - Short term Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.04 Sharpe Ratio 1.43 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-7 Days (0.25%),7 Days and above(NIL) Yield to Maturity 7.27% Effective Maturity 4 Years 10 Months 20 Days Modified Duration 2 Years 7 Months 10 Days Growth of 10,000 investment over the years.
Date Value 30 Sep 20 ₹10,000 30 Sep 21 ₹10,591 30 Sep 22 ₹10,971 30 Sep 23 ₹11,768 30 Sep 24 ₹12,697 30 Sep 25 ₹13,718 Returns for ICICI Prudential Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21 Duration Returns 1 Month 0.7% 3 Month 1.3% 6 Month 3.7% 1 Year 8.2% 3 Year 7.8% 5 Year 6.5% 10 Year 15 Year Since launch 7.9% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.8% 2023 7.4% 2022 4.7% 2021 3.9% 2020 10.6% 2019 9.7% 2018 5.8% 2017 5.9% 2016 11.1% 2015 8% Fund Manager information for ICICI Prudential Short Term Fund
Name Since Tenure Manish Banthia 19 Nov 09 15.79 Yr. Nikhil Kabra 29 Dec 20 4.68 Yr. Data below for ICICI Prudential Short Term Fund as on 15 Sep 25
Asset Allocation
Asset Class Value Cash 3.65% Debt 96.08% Other 0.27% Debt Sector Allocation
Sector Value Corporate 58.16% Government 32.77% Securitized 5.15% Cash Equivalent 3.65% Credit Quality
Rating Value AA 19.28% AAA 80.72% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.79% Govt Stock 2034
Sovereign Bonds | -4% ₹966 Cr 95,187,610 LIC Housing Finance Ltd
Debentures | -3% ₹759 Cr 75,000 6.99% Govt Stock 2034
Sovereign Bonds | -3% ₹710 Cr 69,574,740 Shivshakti Securitisation Trust **
Unlisted bonds | -3% ₹625 Cr 625
↑ 625 7.81% Govt Stock 2033
Sovereign Bonds | -3% ₹573 Cr 55,312,240
↓ -36,000,000 National Bank For Agriculture And Rural Development
Debentures | -3% ₹563 Cr 55,500 Siddhivinayak Securitisation Trust **
Unlisted bonds | -2% ₹525 Cr 525
↑ 525 Vedanta Limited
Debentures | -2% ₹510 Cr 51,000 7.1% Govt Stock 2034
Sovereign Bonds | -2% ₹428 Cr 41,358,430 7.11% Govt Stock 2028
Sovereign Bonds | -2% ₹364 Cr 36,000,000
↑ 36,000,000
Short Term Debt Fund Taxation
Tax implication on debt funds is computed in the following manner-
Short Term Capital Gains
If the holding period of a debt investment is less than 36 months, then it is classified as a short-term investment and these are taxed as per individual's tax slab.
Long Term Capital Gains
If the holding period of debt investment is more than 36 months, then it is classified as a long-term investment and is taxed at 20% with an indexation benefit.
| Capital Gains | Investment Holding Gains | Taxation |
|---|---|---|
| Short Term Capital Gains | Less than 36 months | As per individual's tax slab |
| Long Term Capital Gains | More than 36 months | 20% with indexation benefits |
Risks Involved with Short Term Mutual Funds
Alike all the financial securities, Short term debt funds have certain flaws as well. Some of the risks accompanying these funds include-
Risk of Rising Inflation
Short term debt funds are ideal having a short term financial goal of one to three years and not for long term. So, the investors who are looking for long term investments should invest in Equity Funds, which offers the benefits of rising inflation while yielding good returns.
Risk of Changing Interest Rates
The change in interest rate in the Economy has a little effect on short term debt funds, though the impact is very marginal. As the tenure of duration is short, the impact of interest rate changes in insignificant. However, investors should always look at the duration or maturity of the fund before making any conclusions. A high duration/maturity exposes the Fund to interest rate risk.
Risk of Credit
Usually, short term debt funds invest in instruments that have a high credit rating and have a safe track record. However, there are times when the asset managing company that is managing the fund defaults, the investor has to take the challenge of managing the risk on his own. So, the investors must keep this in mind and invest wisely. Hence, it is always advisable to look a getting into a fund with a good quality portfolio.
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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Research Highlights for Sundaram Short Term Debt Fund