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Short Term Debt Funds or Short Duration Funds | Best Short Term Plans

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Short Term Debt Funds or Short Duration Funds

Updated on November 28, 2023 , 8220 views

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 2023

Some of the best short term debt funds include-

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2022 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
Sundaram Short Term Debt Fund Growth ₹36.3802
↑ 0.01
₹3620.811.412.85.3 4.52%1Y 2M 13D1Y 7M 3D
ICICI Prudential Short Term Fund Growth ₹52.9984
↓ -0.01
₹18,7091.53.27.15.24.77.88%2Y 14D4Y 7M 6D
HDFC Short Term Debt Fund Growth ₹28.0665
↓ 0.00
₹12,3021.42.96.84.73.57.84%2Y 3M 17D3Y 5M 13D
Baroda Pioneer Short Term Bond Fund Growth ₹25.7864
↓ -0.01
₹2371.42.76.64.437.76%2Y 7M 2D3Y 1M 13D
UTI Short Term Income Fund Growth ₹27.9439
↓ -0.01
₹2,3651.42.86.66.23.87.42%2Y 8M 23D3Y 2M 5D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 31 Dec 21
*Above is list of best Short Duration funds having AUM/Net Assets above 100 Crore. Sorted on Last 1 Year Return.

1. Sundaram Short Term Debt Fund

(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.

Sundaram Short Term Debt Fund is a Debt - Short term Bond fund was launched on 5 Sep 02. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 6.9% since its launch.  Ranked 56 in Short term Bond category. .

Below is the key information for 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.

DateValue
30 Nov 18₹10,000
30 Nov 19₹9,563
30 Nov 20₹10,425
30 Nov 21₹11,766

Sundaram Short Term Debt Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Returns for Sundaram Short Term Debt Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21

DurationReturns
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
YearReturns
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
Fund Manager information for Sundaram Short Term Debt Fund
NameSinceTenure

Data below for Sundaram Short Term Debt Fund as on 30 Nov 21

Asset Allocation
Asset ClassValue
Debt Sector Allocation
SectorValue
Credit Quality
RatingValue
Top Securities Holdings / Portfolio
NameHoldingValueQuantity

2. ICICI Prudential Short Term Fund

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.

ICICI Prudential Short Term Fund is a Debt - Short term Bond fund was launched on 25 Oct 01. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.8% since its launch.  Ranked 11 in Short term Bond category.  Return for 2022 was 4.7% , 2021 was 3.9% and 2020 was 10.6% .

Below is the key information for ICICI Prudential Short Term Fund

ICICI Prudential Short Term Fund
Growth
Launch Date 25 Oct 01
NAV (30 Nov 23) ₹52.9984 ↓ -0.01   (-0.01 %)
Net Assets (Cr) ₹18,709 on 31 Oct 23
Category Debt - Short term Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.11
Sharpe Ratio 0.46
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 7.88%
Effective Maturity 4 Years 7 Months 6 Days
Modified Duration 2 Years 14 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 18₹10,000
30 Nov 19₹11,023
30 Nov 20₹12,184
30 Nov 21₹12,704
30 Nov 22₹13,253
30 Nov 23₹14,189

ICICI Prudential Short Term Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for ICICI Prudential Short Term Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21

DurationReturns
1 Month 0.6%
3 Month 1.5%
6 Month 3.2%
1 Year 7.1%
3 Year 5.2%
5 Year 7.2%
10 Year
15 Year
Since launch 7.8%
Historical performance (Yearly) on absolute basis
YearReturns
2022 4.7%
2021 3.9%
2020 10.6%
2019 9.7%
2018 5.8%
2017 5.9%
2016 11.1%
2015 8%
2014 11.6%
2013 7.2%
Fund Manager information for ICICI Prudential Short Term Fund
NameSinceTenure
Manish Banthia19 Nov 0913.96 Yr.
Nikhil Kabra29 Dec 202.84 Yr.

Data below for ICICI Prudential Short Term Fund as on 31 Oct 23

Asset Allocation
Asset ClassValue
Cash9.32%
Debt90.47%
Other0.21%
Debt Sector Allocation
SectorValue
Government49.48%
Corporate44.18%
Cash Equivalent5.59%
Securitized0.55%
Credit Quality
RatingValue
AA12.7%
AAA87.3%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.38% Govt Stock 2027
Sovereign Bonds | -
12%₹2,249 Cr224,727,200
↑ 500,000
8.25% Govt Stock 2033
Sovereign Bonds | -
10%₹1,835 Cr180,908,750
7.06% Govt Stock 2028
Sovereign Bonds | -
9%₹1,674 Cr169,253,450
↑ 10,840,200
7.93% Govt Stock 2034
Sovereign Bonds | -
4%₹810 Cr81,074,740
7.68% Govt Stock 2028
Sovereign Bonds | -
3%₹500 Cr50,172,949
7.18% Govt Stock 2033
Sovereign Bonds | -
3%₹477 Cr48,240,710
India (Republic of)
Sovereign Bonds | -
2%₹418 Cr41,837,800
↑ 41,837,800
Small Industries Development Bank Of India
Debentures | -
2%₹368 Cr37,000
↓ -2,500
Pipeline Infrastructure Limited
Debentures | -
2%₹365 Cr3,629
Small Industries Development Bank Of India
Debentures | -
2%₹300 Cr3,000

3. HDFC Short Term Debt Fund

(Erstwhile HDFC Short Term Opportunities Fund)

To generate regular income through investments in Debt/Money Market Instruments and Government Securities with maturities not exceeding 36 months.

HDFC Short Term Debt Fund is a Debt - Short term Bond fund was launched on 25 Jun 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8% since its launch.  Ranked 30 in Short term Bond category.  Return for 2022 was 3.5% , 2021 was 3.9% and 2020 was 11% .

Below is the key information for HDFC Short Term Debt Fund

HDFC Short Term Debt Fund
Growth
Launch Date 25 Jun 10
NAV (30 Nov 23) ₹28.0665 ↓ 0.00   (-0.01 %)
Net Assets (Cr) ₹12,302 on 31 Oct 23
Category Debt - Short term Bond
AMC HDFC Asset Management Company Limited
Rating
Risk Moderately Low
Expense Ratio 0.74
Sharpe Ratio 0.2
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 300
Exit Load NIL
Yield to Maturity 7.84%
Effective Maturity 3 Years 5 Months 13 Days
Modified Duration 2 Years 3 Months 17 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 18₹10,000
30 Nov 19₹11,035
30 Nov 20₹12,220
30 Nov 21₹12,737
30 Nov 22₹13,142
30 Nov 23₹14,042

HDFC Short Term Debt Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹203,125.
Net Profit of ₹23,125
Invest Now

Returns for HDFC Short Term Debt Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21

DurationReturns
1 Month 0.6%
3 Month 1.4%
6 Month 2.9%
1 Year 6.8%
3 Year 4.7%
5 Year 7%
10 Year
15 Year
Since launch 8%
Historical performance (Yearly) on absolute basis
YearReturns
2022 3.5%
2021 3.9%
2020 11%
2019 9.7%
2018 7%
2017 6.5%
2016 9.3%
2015 8.7%
2014 10.4%
2013 8.4%
Fund Manager information for HDFC Short Term Debt Fund
NameSinceTenure
Anil Bamboli25 Jun 1013.36 Yr.
Dhruv Muchhal22 Jun 230.36 Yr.

Data below for HDFC Short Term Debt Fund as on 31 Oct 23

Asset Allocation
Asset ClassValue
Cash7.94%
Debt91.83%
Other0.23%
Debt Sector Allocation
SectorValue
Government50.94%
Corporate42.32%
Cash Equivalent5.95%
Securitized0.56%
Credit Quality
RatingValue
AA16.03%
AAA83.97%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.68% Govt Stock 2028
Sovereign Bonds | -
5%₹563 Cr56,500,000
7.26% Govt Stock 2033
Sovereign Bonds | -
4%₹441 Cr44,500,000
7.38% Govt Stock 2027
Sovereign Bonds | -
3%₹415 Cr41,500,000
7.1% Govt Stock 2029
Sovereign Bonds | -
3%₹365 Cr37,000,000
6.79% Govt Stock 2027
Sovereign Bonds | -
3%₹359 Cr36,500,000
7.26% Govt Stock 2032
Sovereign Bonds | -
3%₹342 Cr34,500,000
7.18% Govt Stock 2033
Sovereign Bonds | -
3%₹321 Cr32,500,000
↑ 12,500,000
Bharti Telecom Limited
Debentures | -
2%₹276 Cr2,750
State Bank Of India
Debentures | -
2%₹250 Cr2,500
Ongc Petro Additions Limited
Debentures | -
2%₹200 Cr20,000

4. Baroda Pioneer Short Term Bond Fund

The objective of the Scheme is to generate income from a portfolio constituted of short term debt and money market securities.

Baroda Pioneer Short Term Bond Fund is a Debt - Short term Bond fund was launched on 30 Jun 10. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 7.3% since its launch.  Ranked 21 in Short term Bond category.  Return for 2022 was 3% , 2021 was 3.7% and 2020 was 7.5% .

Below is the key information for Baroda Pioneer Short Term Bond Fund

Baroda Pioneer Short Term Bond Fund
Growth
Launch Date 30 Jun 10
NAV (30 Nov 23) ₹25.7864 ↓ -0.01   (-0.04 %)
Net Assets (Cr) ₹237 on 15 Nov 23
Category Debt - Short term Bond
AMC Baroda Pioneer Asset Management Co. Ltd.
Rating
Risk Moderately Low
Expense Ratio 1.05
Sharpe Ratio 0.02
Information Ratio 0
Alpha Ratio 0
Min Investment 5,000
Min SIP Investment 500
Exit Load 0-15 Days (0.25%),15 Days and above(NIL)
Yield to Maturity 7.76%
Effective Maturity 3 Years 1 Month 13 Days
Modified Duration 2 Years 7 Months 2 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 18₹10,000
30 Nov 19₹10,955
30 Nov 20₹11,776
30 Nov 21₹12,226
30 Nov 22₹12,566
30 Nov 23₹13,400

Baroda Pioneer Short Term Bond Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹200,132.
Net Profit of ₹20,132
Invest Now

Returns for Baroda Pioneer Short Term Bond Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21

DurationReturns
1 Month 0.6%
3 Month 1.4%
6 Month 2.7%
1 Year 6.6%
3 Year 4.4%
5 Year 6%
10 Year
15 Year
Since launch 7.3%
Historical performance (Yearly) on absolute basis
YearReturns
2022 3%
2021 3.7%
2020 7.5%
2019 8.8%
2018 7.1%
2017 7.6%
2016 9.5%
2015 8.6%
2014 9.5%
2013 7.9%
Fund Manager information for Baroda Pioneer Short Term Bond Fund
NameSinceTenure
Prashant Pimple21 Oct 221.03 Yr.
Mayank Prakash14 Mar 221.63 Yr.
Jay Sheth1 Sep 230.16 Yr.

Data below for Baroda Pioneer Short Term Bond Fund as on 15 Nov 23

Asset Allocation
Asset ClassValue
Cash11.26%
Debt88.47%
Other0.27%
Debt Sector Allocation
SectorValue
Government44.51%
Corporate43.96%
Cash Equivalent11.26%
Credit Quality
RatingValue
AA13.82%
AAA86.18%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
06.99 Maharashtra SDL 2029
Sovereign Bonds | -
8%₹19 Cr2,000,000
Sikka Ports & Terminals Limited
Debentures | -
5%₹12 Cr120
Rec Limited
Debentures | -
5%₹12 Cr120
Jamnagar Utilities & Power Private Limited
Debentures | -
5%₹11 Cr110
↑ 110
07.37 Goi 2028
Sovereign Bonds | -
4%₹10 Cr1,000,000
↑ 1,000,000
Export Import Bank Of India
Debentures | -
4%₹10 Cr100
Small Industries Development Bank Of India
Debentures | -
4%₹10 Cr1,000
↑ 1,000
Housing And Urban Development Corporation Ltd.
Debentures | -
4%₹10 Cr1,000
Ntpc Limited
Debentures | -
4%₹10 Cr100
Sundaram Home Finance Limited
Debentures | -
4%₹10 Cr1,000

5. UTI Short Term Income Fund

To generate steady and reasonable income with low risk and high level of liquidity from a portfolio of money market securities and high quality debt.

UTI Short Term Income Fund is a Debt - Short term Bond fund was launched on 19 Sep 07. It is a fund with Moderate risk and has given a CAGR/Annualized return of 6.5% since its launch.  Ranked 10 in Short term Bond category.  Return for 2022 was 3.8% , 2021 was 8.4% and 2020 was 10.5% .

Below is the key information for UTI Short Term Income Fund

UTI Short Term Income Fund
Growth
Launch Date 19 Sep 07
NAV (30 Nov 23) ₹27.9439 ↓ -0.01   (-0.03 %)
Net Assets (Cr) ₹2,365 on 31 Oct 23
Category Debt - Short term Bond
AMC UTI Asset Management Company Ltd
Rating
Risk Moderate
Expense Ratio 0.95
Sharpe Ratio -0.22
Information Ratio 0
Alpha Ratio 0
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 7.42%
Effective Maturity 3 Years 2 Months 5 Days
Modified Duration 2 Years 8 Months 23 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 18₹10,000
30 Nov 19₹9,685
30 Nov 20₹10,666
30 Nov 21₹11,580
30 Nov 22₹11,983
30 Nov 23₹12,774

UTI Short Term Income Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹197,169.
Net Profit of ₹17,169
Invest Now

Returns for UTI Short Term Income Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 31 Dec 21

DurationReturns
1 Month 0.6%
3 Month 1.4%
6 Month 2.8%
1 Year 6.6%
3 Year 6.2%
5 Year 5%
10 Year
15 Year
Since launch 6.5%
Historical performance (Yearly) on absolute basis
YearReturns
2022 3.8%
2021 8.4%
2020 10.5%
2019 -3.9%
2018 6%
2017 6.1%
2016 10.1%
2015 8.3%
2014 10.9%
2013 9%
Fund Manager information for UTI Short Term Income Fund
NameSinceTenure
Sudhir Agarwal25 Oct 1211.02 Yr.

Data below for UTI Short Term Income Fund as on 31 Oct 23

Asset Allocation
Asset ClassValue
Cash32.25%
Debt67.75%
Debt Sector Allocation
SectorValue
Corporate42.77%
Government42.24%
Cash Equivalent14.99%
Credit Quality
RatingValue
AA18.71%
AAA81.29%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
7.38% Govt Stock 2027
Sovereign Bonds | -
11%₹250 Cr2,500,000,000
↑ 1,000,000,000
Power Finance Corporation Ltd.
Debentures | -
9%₹225 Cr22,500
↑ 2,500
7.18% Govt Stock 2033
Sovereign Bonds | -
6%₹149 Cr1,500,000,000
↓ -750,000,000
182 DTB 29022024
Sovereign Bonds | -
6%₹146 Cr1,500,000,000
7.06% Govt Stock 2028
Sovereign Bonds | -
5%₹124 Cr1,250,000,000
↑ 1,250,000,000
Axis Finance Limited
Debentures | -
5%₹110 Cr1,100
India Grid TRust
Debentures | -
3%₹75 Cr750
Mahindra Rural Housing Finance Limited
Debentures | -
3%₹69 Cr700
Can Fin Homes Limited
Debentures | -
3%₹64 Cr650
TATA Motors Finance Solutions Limited
Debentures | -
2%₹60 Cr600

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-In-Short-Term-Debt-Funds

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.

Disclaimer:
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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