+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.
Fund Selection Methodology used to find 5 funds
Top Short Duration (Short-Term) Debt Funds 2026
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 ICICI Prudential Short Term Fund Growth ₹64.5082
↑ 0.02 ₹19,175 2.5 3.3 6.2 7.5 8 8.14% 2Y 8M 19D 4Y 5M 23D Bandhan Bond Fund Short Term Plan Growth ₹61.1841
↑ 0.02 ₹8,889 2.7 3.7 6.1 7.4 7.5 7.73% 2Y 2M 16D 2Y 11M 26D HDFC Short Term Debt Fund Growth ₹34.2205
↑ 0.00 ₹15,008 2.4 3.1 5.9 7.5 7.8 8.01% 2Y 4M 28D 3Y 1M 24D Axis Short Term Fund Growth ₹33.069
↑ 0.01 ₹8,183 2.4 3.1 5.9 7.4 8.1 7.92% 2Y 3M 22D 3Y 2M 23D 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 ICICI Prudential Short Term Fund Bandhan Bond Fund Short Term Plan HDFC Short Term Debt Fund Axis Short Term Fund Point 1 Bottom quartile AUM (₹362 Cr). Highest AUM (₹19,175 Cr). Lower mid AUM (₹8,889 Cr). Upper mid AUM (₹15,008 Cr). Bottom quartile AUM (₹8,183 Cr). Point 2 Established history (23+ yrs). Established history (24+ yrs). Oldest track record among peers (25 yrs). Established history (16+ yrs). Established history (16+ yrs). Point 3 Rating: 2★ (bottom quartile). Top rated. Rating: 2★ (bottom quartile). Rating: 3★ (upper mid). Rating: 3★ (lower mid). Point 4 Risk profile: Moderately Low. Risk profile: Moderate. Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderately Low. Point 5 1Y return: 12.83% (top quartile). 1Y return: 6.16% (upper mid). 1Y return: 6.13% (lower mid). 1Y return: 5.88% (bottom quartile). 1Y return: 5.86% (bottom quartile). Point 6 1M return: 0.20% (bottom quartile). 1M return: 0.80% (upper mid). 1M return: 0.81% (top quartile). 1M return: 0.73% (lower mid). 1M return: 0.70% (bottom quartile). Point 7 Sharpe: 0.98 (top quartile). Sharpe: 0.29 (upper mid). Sharpe: 0.15 (lower mid). Sharpe: 0.11 (bottom quartile). Sharpe: 0.14 (bottom quartile). 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): 8.14% (top quartile). Yield to maturity (debt): 7.73% (bottom quartile). Yield to maturity (debt): 8.01% (upper mid). Yield to maturity (debt): 7.92% (lower mid). Point 10 Modified duration: 1.20 yrs (top quartile). Modified duration: 2.72 yrs (bottom quartile). Modified duration: 2.21 yrs (upper mid). Modified duration: 2.41 yrs (bottom quartile). Modified duration: 2.31 yrs (lower mid). Sundaram Short Term Debt Fund
ICICI Prudential Short Term Fund
Bandhan Bond Fund Short Term Plan
HDFC Short Term Debt Fund
Axis Short Term Fund
*Above is list of best 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 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 (Erstwhile IDFC Super Saver Income Fund - Short Term Plan) The primary investment objective of the scheme is to seek to generate stable returns with a low-risk strategy by creating a portfolio that is invested in good quality fixed income & Money Market securities. However, there can be no assurance that the investment objectives of the scheme will be realized. Research Highlights for Bandhan Bond Fund Short Term Plan Below is the key information for Bandhan Bond Fund Short Term Plan Returns up to 1 year are on (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. Research Highlights for HDFC Short Term Debt Fund Below is the key information for HDFC 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 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 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. ICICI Prudential Short Term Fund
ICICI Prudential Short Term Fund
Growth Launch Date 25 Oct 01 NAV (14 Aug 26) ₹64.5082 ↑ 0.02 (0.02 %) Net Assets (Cr) ₹19,175 on 30 Jun 26 Category Debt - Short term Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.04 Sharpe Ratio 0.29 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 8.14% Effective Maturity 4 Years 5 Months 23 Days Modified Duration 2 Years 8 Months 19 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 21 ₹10,000 31 Jul 22 ₹10,349 31 Jul 23 ₹11,116 31 Jul 24 ₹11,964 31 Jul 25 ₹13,014 31 Jul 26 ₹13,759 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 0.8% 3 Month 2.5% 6 Month 3.3% 1 Year 6.2% 3 Year 7.5% 5 Year 6.6% 10 Year 15 Year Since launch 7.8% Historical performance (Yearly) on absolute basis
Year Returns 2024 8% 2023 7.8% 2022 7.4% 2021 4.7% 2020 3.9% 2019 10.6% 2018 9.7% 2017 5.8% 2016 5.9% 2015 11.1% Fund Manager information for ICICI Prudential Short Term Fund
Name Since Tenure Manish Banthia 19 Nov 09 16.71 Yr. Nikhil Kabra 29 Dec 20 5.59 Yr. Data below for ICICI Prudential Short Term Fund as on 30 Jun 26
Asset Allocation
Asset Class Value Debt 102.57% Other 0.33% Debt Sector Allocation
Sector Value Corporate 68.49% Government 34.47% Credit Quality
Rating Value AA 21.25% AAA 78.75% Top Securities Holdings / Portfolio
Name Holding Value Quantity National Bank For Agriculture And Rural Development
Debentures | -5% ₹895 Cr 89,500 LIC Housing Finance Ltd
Debentures | -4% ₹749 Cr 75,000 Vedanta Limited
Debentures | -3% ₹590 Cr 58,500 SHIVSHAKTI SECURITISATION TRUST
Unlisted bonds | -3% ₹589 Cr 600 National Bank For Agriculture And Rural Development
Debentures | -3% ₹535 Cr 53,500 SIDDHIVINAYAK SECURITISATION TRUST
Unlisted bonds | -3% ₹518 Cr 525 Small Industries Development Bank Of India
Debentures | -2% ₹443 Cr 44,700 Cholamandalam Investment And Finance Company Limited
Debentures | -2% ₹299 Cr 30,000 Summit Digitel Infrastructure Limited
Debentures | -2% ₹286 Cr 28,300 Small Industries Development Bank Of India
Debentures | -1% ₹270 Cr 27,000 3. Bandhan Bond Fund Short Term Plan
Bandhan Bond Fund Short Term Plan
Growth Launch Date 14 Dec 00 NAV (14 Aug 26) ₹61.1841 ↑ 0.02 (0.03 %) Net Assets (Cr) ₹8,889 on 30 Jun 26 Category Debt - Short term Bond AMC IDFC Asset Management Company Limited Rating ☆☆ Risk Moderately Low Expense Ratio 0.8 Sharpe Ratio 0.15 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 7.73% Effective Maturity 2 Years 11 Months 26 Days Modified Duration 2 Years 2 Months 16 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 21 ₹10,000 31 Jul 22 ₹10,234 31 Jul 23 ₹10,848 31 Jul 24 ₹11,665 31 Jul 25 ₹12,714 31 Jul 26 ₹13,402 Returns for Bandhan Bond Fund Short Term Plan
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 2.7% 6 Month 3.7% 1 Year 6.1% 3 Year 7.4% 5 Year 6.1% 10 Year 15 Year Since launch 7.3% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.5% 2023 7.8% 2022 6.9% 2021 2.8% 2020 3.4% 2019 9.7% 2018 9.7% 2017 6.5% 2016 5.9% 2015 8.8% Fund Manager information for Bandhan Bond Fund Short Term Plan
Name Since Tenure Suyash Choudhary 11 Mar 11 15.4 Yr. Brijesh Shah 10 Jun 24 2.14 Yr. Data below for Bandhan Bond Fund Short Term Plan as on 30 Jun 26
Asset Allocation
Asset Class Value Cash 17.76% Debt 81.9% Other 0.34% Debt Sector Allocation
Sector Value Corporate 53.84% Government 40.47% Cash Equivalent 5.34% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.24% Govt Stock 2055
Sovereign Bonds | -9% ₹800 Cr 81,500,000
↑ 81,500,000 National Bank For Agriculture And Rural Development
Debentures | -5% ₹500 Cr 50,000,000
↑ 50,000,000 National Bank For Agriculture And Rural Development
Debentures | -5% ₹450 Cr 45,000,000
↑ 2,000,000 Bajaj Finance Limited
Debentures | -4% ₹369 Cr 37,500,000 Tata Capital Housing Finance Limited
Debentures | -3% ₹250 Cr 25,000,000 7.3% Govt Stock 2053
Sovereign Bonds | -3% ₹248 Cr 25,100,000
↑ 10,900,000 8.08% Tamilnadu SDL 2028
Sovereign Bonds | -2% ₹206 Cr 20,000,000 Indian Railway Finance Corporation Limited
Debentures | -2% ₹202 Cr 20,000,000 Tata Capital Ltd. 8.15%
Debentures | -2% ₹201 Cr 20,000,000 Bajaj Housing Finance Limited
Debentures | -2% ₹201 Cr 20,000,000
↑ 20,000,000 4. HDFC Short Term Debt Fund
HDFC Short Term Debt Fund
Growth Launch Date 25 Jun 10 NAV (14 Aug 26) ₹34.2205 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹15,008 on 30 Jun 26 Category Debt - Short term Bond AMC HDFC Asset Management Company Limited Rating ☆☆☆ Risk Moderately Low Expense Ratio 0.69 Sharpe Ratio 0.11 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 300 Exit Load NIL Yield to Maturity 8.01% Effective Maturity 3 Years 1 Month 24 Days Modified Duration 2 Years 4 Months 28 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 21 ₹10,000 31 Jul 22 ₹10,279 31 Jul 23 ₹10,978 31 Jul 24 ₹11,830 31 Jul 25 ₹12,890 31 Jul 26 ₹13,597 Returns for HDFC 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 0.7% 3 Month 2.4% 6 Month 3.1% 1 Year 5.9% 3 Year 7.5% 5 Year 6.4% 10 Year 15 Year Since launch 7.9% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.8% 2023 8.3% 2022 7.1% 2021 3.5% 2020 3.9% 2019 11% 2018 9.7% 2017 7% 2016 6.5% 2015 9.3% Fund Manager information for HDFC Short Term Debt Fund
Name Since Tenure Anil Bamboli 25 Jun 10 16.11 Yr. Dhruv Muchhal 22 Jun 23 3.11 Yr. Data below for HDFC Short Term Debt Fund as on 30 Jun 26
Asset Allocation
Asset Class Value Cash 5.16% Debt 94.49% Other 0.35% Debt Sector Allocation
Sector Value Corporate 72.98% Government 21.99% Cash Equivalent 4.68% Credit Quality
Rating Value AA 17.08% AAA 82.92% Top Securities Holdings / Portfolio
Name Holding Value Quantity Jubilant Beverages Limited
Debentures | -3% ₹426 Cr 38,500 Jtpm Metal TRaders Limited
Debentures | -3% ₹385 Cr 36,000 Jamnagar Utilities & Power Private Limited
Debentures | -2% ₹352 Cr 35,000 SHIVSHAKTI SECURITISATION TRUST
Unlisted bonds | -2% ₹343 Cr 350 National Bank For Agriculture And Rural Development
Debentures | -2% ₹316 Cr 31,670 Aditya Birla Renewables Limited
Debentures | -2% ₹311 Cr 31,000
↓ -12,500 National Bank For Agriculture And Rural Development
Debentures | -2% ₹301 Cr 30,000 Pipeline Infrastructure Limited
Debentures | -2% ₹248 Cr 24,500 Power Finance Corporation Limited
Debentures | -2% ₹247 Cr 25,000 TATA Communications Limited
Debentures | -2% ₹246 Cr 25,000 5. Axis Short Term Fund
Axis Short Term Fund
Growth Launch Date 22 Jan 10 NAV (14 Aug 26) ₹33.069 ↑ 0.01 (0.02 %) Net Assets (Cr) ₹8,183 on 30 Jun 26 Category Debt - Short term Bond AMC Axis Asset Management Company Limited Rating ☆☆☆ Risk Moderately Low Expense Ratio 0.88 Sharpe Ratio 0.14 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 7.92% Effective Maturity 3 Years 2 Months 23 Days Modified Duration 2 Years 3 Months 22 Days Growth of 10,000 investment over the years.
Date Value 31 Jul 21 ₹10,000 31 Jul 22 ₹10,299 31 Jul 23 ₹10,960 31 Jul 24 ₹11,763 31 Jul 25 ₹12,844 31 Jul 26 ₹13,551 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 0.7% 3 Month 2.4% 6 Month 3.1% 1 Year 5.9% 3 Year 7.4% 5 Year 6.3% 10 Year 15 Year Since launch 7.5% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.1% 2023 8% 2022 6.8% 2021 3.7% 2020 3.5% 2019 10.1% 2018 9.8% 2017 6.3% 2016 5.9% 2015 9.6% Fund Manager information for Axis Short Term Fund
Name Since Tenure Devang Shah 5 Nov 12 13.74 Yr. Aditya Pagaria 3 Jul 23 3.08 Yr. Data below for Axis Short Term Fund as on 30 Jun 26
Asset Allocation
Asset Class Value Cash 7.32% Debt 92.23% Other 0.45% Debt Sector Allocation
Sector Value Corporate 67.16% Government 24.74% Cash Equivalent 7.65% Credit Quality
Rating Value AA 16.14% AAA 83.86% Top Securities Holdings / Portfolio
Name Holding Value Quantity Nuclear Power Corporation Of India Limited
Debentures | -4% ₹302 Cr 30,000 Small Industries Development Bank Of India
Debentures | -3% ₹274 Cr 27,500 SIDDHIVINAYAK SECURITISATION TRUST
Unlisted bonds | -3% ₹209 Cr 213 National Bank For Agriculture And Rural Development
Debentures | -2% ₹200 Cr 20,000 Power Finance Corporation Limited
Debentures | -2% ₹198 Cr 20,000
↓ -5,000 7.71% Govt Stock 2066
Sovereign Bonds | -2% ₹175 Cr 17,000,000
↑ 12,000,000 Jubilant Beverages Limited
Debentures | -2% ₹174 Cr 15,750 6.94% Govt Stock 2036
Sovereign Bonds | -2% ₹168 Cr 16,599,900
↑ 9,000,000 Small Industries Development Bank of India 7.4%
Debentures | -2% ₹160 Cr 16,000
↑ 6,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹150 Cr 15,000
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