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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 December 11, 2019 , 1407 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 2019

Some of the best short term debt funds include-

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2018 (%)Debt Yield (YTM)Mod. DurationEff. Maturity
DHFL Pramerica Short Maturity Fund Growth ₹32.6674
↓ -0.02
₹8427.910.8-0.43.85.57.57%2Y 5M 19D3Y 1M 6D
ICICI Prudential Short Term Fund Growth ₹41.0352
↓ -0.02
₹10,9091.64.59.66.95.87.28%1Y 10M 24D2Y 6M 29D
Reliance Short Term Fund Growth ₹36.9073
↓ -0.02
₹5,9101.74.79.56.75.57.4%2Y 14D2Y 5M 12D
Aditya Birla Sun Life Short Term Opportunities Fund Growth ₹32.7693
↑ 0.01
₹3,2201.54.28.96.76.57.75%1Y 10M 24D2Y 5M 1D
UTI Short Term Income Fund Growth ₹21.1045
↓ -0.01
₹2,2021.85-3.92.567.23%2Y 1M 2D2Y 5M 1D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 13 Dec 19

1. DHFL Pramerica Short Maturity Fund

To generate steady returns with low to medium market risk for investors by investing in a portfolio of short -medium term debt and money market securities.

DHFL Pramerica Short Maturity Fund is a Debt - Short term Bond fund was launched on 21 Jan 03. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.3% since its launch.  Ranked 5 in Short term Bond category.  Return for 2018 was 5.5% , 2017 was 6.8% and 2016 was 10% .

Below is the key information for DHFL Pramerica Short Maturity Fund

DHFL Pramerica Short Maturity Fund
Growth
Launch Date 21 Jan 03
NAV (13 Dec 19) ₹32.6674 ↓ -0.02   (-0.06 %)
Net Assets (Cr) ₹84 on 31 Oct 19
Category Debt - Short term Bond
AMC DHFL Pramerica Asset Managers Private Limited
Rating
Risk Moderate
Expense Ratio 1.02
Sharpe Ratio -0.11
Information Ratio -0.48
Alpha Ratio -32.47
Min Investment 5,000
Min SIP Investment 500
Exit Load 0-6 Months (0.5%),6 Months and above(NIL)
Yield to Maturity 7.57%
Effective Maturity 3 Years 1 Month 6 Days
Modified Duration 2 Years 5 Months 19 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 14₹10,000
30 Nov 15₹10,853
30 Nov 16₹12,010
30 Nov 17₹12,821
30 Nov 18₹13,419
30 Nov 19₹13,467

DHFL Pramerica Short Maturity 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 DHFL Pramerica Short Maturity Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 13 Dec 19

DurationReturns
1 Month -0.7%
3 Month 27.9%
6 Month 10.8%
1 Year -0.4%
3 Year 3.8%
5 Year 5.9%
10 Year
15 Year
Since launch 7.3%
Historical performance (Yearly) on absolute basis
YearReturns
2018 5.5%
2017 6.8%
2016 10%
2015 8.3%
2014 10.6%
2013 8.1%
2012 9.8%
2011 8.9%
2010 4.9%
2009 7.7%
Fund Manager information for DHFL Pramerica Short Maturity Fund
NameSinceTenure
Kumaresh Ramakrishnan13 Dec 171.8 Yr.
Puneet Pal13 Dec 171.8 Yr.

Data below for DHFL Pramerica Short Maturity Fund as on 31 Oct 19

Asset Allocation
Asset ClassValue
Cash12.69%
Debt87.31%
Debt Sector Allocation
SectorValue
Corporate48.86%
Government38.45%
Cash Equivalent12.69%
Credit Quality
RatingValue
AA5.69%
AAA84.78%
BBB9.53%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
HINDUSTAN PETROLEUM CORPORATION LIMITED
Debentures | -
10%₹9 Cr850,000
↑ 850,000
REC LIMITED
Debentures | -
10%₹8 Cr800,000
↑ 800,000
Yes Bank Limited
Debentures | -
9%₹7 Cr830,000
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
Debentures | -
8%₹7 Cr700,000
↑ 700,000
Reliance Jio Infocomm Limited
Debentures | -
7%₹6 Cr610,000
↑ 610,000
NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -
7%₹6 Cr600,000
↑ 600,000
GOVT STOCK
Sovereign Bonds | -
6%₹5 Cr500,000
↓ -500,000
Power Finance Corporation Ltd.
Debentures | -
6%₹5 Cr500,000
↑ 500,000
Reliance Industries Limited
Debentures | -
6%₹5 Cr500,000
↑ 500,000
Clearing Corporation Of India Ltd.
CBLO | -
6%₹5 Cr

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 8.1% since its launch.  Ranked 11 in Short term Bond category.  Return for 2018 was 5.8% , 2017 was 5.9% and 2016 was 11.1% .

Below is the key information for ICICI Prudential Short Term Fund

ICICI Prudential Short Term Fund
Growth
Launch Date 25 Oct 01
NAV (13 Dec 19) ₹41.0352 ↓ -0.02   (-0.05 %)
Net Assets (Cr) ₹10,909 on 31 Oct 19
Category Debt - Short term Bond
AMC ICICI Prudential Asset Management Company Limited
Rating
Risk Moderate
Expense Ratio 1.24
Sharpe Ratio 4.37
Information Ratio -0.54
Alpha Ratio -1.09
Min Investment 5,000
Min SIP Investment 1,000
Exit Load 0-7 Days (0.25%),7 Days and above(NIL)
Yield to Maturity 7.28%
Effective Maturity 2 Years 6 Months 29 Days
Modified Duration 1 Year 10 Months 24 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 14₹10,000
30 Nov 15₹10,833
30 Nov 16₹12,169
30 Nov 17₹12,847
30 Nov 18₹13,460
30 Nov 19₹14,838

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 13 Dec 19

DurationReturns
1 Month 0.2%
3 Month 1.6%
6 Month 4.5%
1 Year 9.6%
3 Year 6.9%
5 Year 8%
10 Year
15 Year
Since launch 8.1%
Historical performance (Yearly) on absolute basis
YearReturns
2018 5.8%
2017 5.9%
2016 11.1%
2015 8%
2014 11.6%
2013 7.2%
2012 9.5%
2011 8.7%
2010 4.4%
2009 5.8%
Fund Manager information for ICICI Prudential Short Term Fund
NameSinceTenure
Manish Banthia19 Nov 099.53 Yr.

Data below for ICICI Prudential Short Term Fund as on 31 Oct 19

Asset Allocation
Asset ClassValue
Cash11.51%
Debt88.49%
Debt Sector Allocation
SectorValue
Corporate66.36%
Government25.29%
Cash Equivalent8.35%
Credit Quality
RatingValue
AA17.57%
AAA82.43%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
GOVT STOCK
Sovereign Bonds | -
6%₹609 Cr58,000,000
↑ 17,000,000
LIC HOUSING FINANCE LIMITED
Debentures | -
4%₹430 Cr4,250
PIPELINE INFRASTRUCTURE PRIVATE LIMITED
Debentures | -
3%₹356 Cr3,529
↑ 1,100
State Bank Of India
Debentures | -
3%₹311 Cr3,000
Net Current Assets
Net Current Assets | -
3%₹292 Cr
NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -
2%₹268 Cr2,550
Treps
CBLO/Reverse Repo | -
2%₹254 Cr
TATA MOTORS FINANCE LIMITED
Debentures | -
2%₹251 Cr2,500
Reliance Utilities And Power Private Limited
Debentures | -
2%₹235 Cr2,250
Reliance Ports And Terminals Limited
Debentures | -
2%₹215 Cr2,078

3. Reliance Short Term Fund

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.

Reliance Short Term Fund is a Debt - Short term Bond fund was launched on 18 Dec 02. It is a fund with Moderately Low risk and has given a CAGR/Annualized return of 8% since its launch.  Ranked 17 in Short term Bond category.  Return for 2018 was 5.5% , 2017 was 5.7% and 2016 was 9.8% .

Below is the key information for Reliance Short Term Fund

Reliance Short Term Fund
Growth
Launch Date 18 Dec 02
NAV (13 Dec 19) ₹36.9073 ↓ -0.02   (-0.05 %)
Net Assets (Cr) ₹5,910 on 31 Oct 19
Category Debt - Short term Bond
AMC Reliance Nippon Life Asset Management Ltd.
Rating
Risk Moderately Low
Expense Ratio 1.1
Sharpe Ratio 4.31
Information Ratio -1.41
Alpha Ratio -1.44
Min Investment 5,000
Min SIP Investment 100
Exit Load NIL
Yield to Maturity 7.4%
Effective Maturity 2 Years 5 Months 12 Days
Modified Duration 2 Years 14 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 14₹10,000
30 Nov 15₹10,849
30 Nov 16₹12,037
30 Nov 17₹12,684
30 Nov 18₹13,231
30 Nov 19₹14,586

Reliance 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 Reliance 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 13 Dec 19

DurationReturns
1 Month 0.2%
3 Month 1.7%
6 Month 4.7%
1 Year 9.5%
3 Year 6.7%
5 Year 7.6%
10 Year
15 Year
Since launch 8%
Historical performance (Yearly) on absolute basis
YearReturns
2018 5.5%
2017 5.7%
2016 9.8%
2015 8.1%
2014 11.3%
2013 7.5%
2012 9.8%
2011 7.9%
2010 5%
2009 8.9%
Fund Manager information for Reliance Short Term Fund
NameSinceTenure
Prashant Pimple10 Jan 0613.81 Yr.
Kinjal Desai25 May 181.44 Yr.

Data below for Reliance Short Term Fund as on 31 Oct 19

Asset Allocation
Asset ClassValue
Cash18.38%
Debt81.62%
Other0%
Debt Sector Allocation
SectorValue
Corporate61.11%
Government23.5%
Cash Equivalent15.39%
Credit Quality
RatingValue
AA14.76%
AAA85.24%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
GOVT STOCK
Sovereign Bonds | -
12%₹681 Cr65,500,000
↑ 42,500,000
Triparty Repo
CBLO/Reverse Repo | -
8%₹455 Cr
Muthoot Finance Limited
Debentures | -
5%₹310 Cr3,171,098
State Bank Of India
Debentures | -
5%₹303 Cr3,000
NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -
5%₹299 Cr2,850
↓ -300
INDIA GRID TRUST
Debentures | -
4%₹213 Cr2,100
Housing Development Finance Corporation Limited
Debentures | -
3%₹204 Cr2,000
LIC Housing Finance Limited
Debentures | -
3%₹201 Cr2,000
EMBASSY OFFICE PARKS REIT
Debentures | -
3%₹193 Cr1,830
Reliance Utilities And Power Private Limited
Debentures | -
3%₹190 Cr1,865

4. Aditya Birla Sun Life Short Term Opportunities Fund

An Open ended Income scheme with the objective to generate regular income by investing primarily in investment grade fixed income securities / money market instruments with short to medium term maturities and across the credit spectrum within the universe of investment grade rating.

Aditya Birla Sun Life Short Term Opportunities Fund is a Debt - Short term Bond fund was launched on 9 May 03. It is a fund with Moderate risk and has given a CAGR/Annualized return of 7.4% since its launch.  Ranked 18 in Short term Bond category.  Return for 2018 was 6.5% , 2017 was 5.6% and 2016 was 11.3% .

Below is the key information for Aditya Birla Sun Life Short Term Opportunities Fund

Aditya Birla Sun Life Short Term Opportunities Fund
Growth
Launch Date 9 May 03
NAV (13 Dec 19) ₹32.7693 ↑ 0.01   (0.02 %)
Net Assets (Cr) ₹3,220 on 31 Oct 19
Category Debt - Short term Bond
AMC Birla Sun Life Asset Management Co Ltd
Rating
Risk Moderate
Expense Ratio 1.16
Sharpe Ratio 3.8
Information Ratio -0.47
Alpha Ratio -1.9
Min Investment 1,000
Min SIP Investment 1,000
Exit Load 0-90 Days (0.5%),90 Days and above(NIL)
Yield to Maturity 7.75%
Effective Maturity 2 Years 5 Months 1 Day
Modified Duration 1 Year 10 Months 24 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 14₹10,000
30 Nov 15₹10,851
30 Nov 16₹12,250
30 Nov 17₹12,843
30 Nov 18₹13,529
30 Nov 19₹14,861

Aditya Birla Sun Life Short Term Opportunities Fund SIP Returns

   
My Monthly Investment:
Investment Tenure:
Years
Expected Annual Returns:
%
Total investment amount is ₹180,000
expected amount after 3 Years is ₹206,148.
Net Profit of ₹26,148
Invest Now

Returns for Aditya Birla Sun Life Short Term Opportunities Fund

Returns up to 1 year are on absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 13 Dec 19

DurationReturns
1 Month 0.1%
3 Month 1.5%
6 Month 4.2%
1 Year 8.9%
3 Year 6.7%
5 Year 8%
10 Year
15 Year
Since launch 7.4%
Historical performance (Yearly) on absolute basis
YearReturns
2018 6.5%
2017 5.6%
2016 11.3%
2015 8.4%
2014 11.3%
2013 10.1%
2012 11.1%
2011 9.5%
2010 6%
2009 8.1%
Fund Manager information for Aditya Birla Sun Life Short Term Opportunities Fund
NameSinceTenure
Maneesh Dangi1 Apr 172.58 Yr.
Kaustubh Gupta11 Sep 145.14 Yr.

Data below for Aditya Birla Sun Life Short Term Opportunities Fund as on 31 Oct 19

Asset Allocation
Asset ClassValue
Cash12.34%
Debt87.66%
Debt Sector Allocation
SectorValue
Corporate50.05%
Government39.78%
Cash Equivalent10.05%
Securitized0.13%
Credit Quality
RatingValue
A9.73%
AA19.53%
AAA69.56%
Below B1.18%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
ADANI PROPERTIES PRIVATE LIMITED
Debentures | -
6%₹196 Cr171
↓ -29
Clearing Corporation Of India Limited
CBLO | -
5%₹156 Cr
REC LIMITED
Debentures | -
5%₹149 Cr1,450
NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -
3%₹110 Cr1,050
Net Receivables / (Payables)
Net Current Assets | -
3%₹105 Cr
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA
Debentures | -
3%₹102 Cr1,000
7.72% GS 2025
Sovereign Bonds | -
3%₹100 Cr9,500,000
↑ 9,500,000
Punjab National Bank
Debentures | -
3%₹98 Cr1,000
GOVT STOCK
Sovereign Bonds | -
3%₹97 Cr9,500,000
↑ 9,500,000
State Bank Of India
Debentures | -
3%₹96 Cr950

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 6.3% since its launch.  Ranked 10 in Short term Bond category.  Return for 2018 was 6% , 2017 was 6.1% and 2016 was 10.1% .

Below is the key information for UTI Short Term Income Fund

UTI Short Term Income Fund
Growth
Launch Date 19 Sep 07
NAV (13 Dec 19) ₹21.1045 ↓ -0.01   (-0.05 %)
Net Assets (Cr) ₹2,202 on 31 Oct 19
Category Debt - Short term Bond
AMC UTI Asset Management Company Ltd
Rating
Risk Moderate
Expense Ratio 0.9
Sharpe Ratio -0.48
Information Ratio -0.7
Alpha Ratio -36.76
Min Investment 10,000
Min SIP Investment 500
Exit Load NIL
Yield to Maturity 7.23%
Effective Maturity 2 Years 5 Months 1 Day
Modified Duration 2 Years 1 Month 2 Days

Growth of 10,000 investment over the years.

DateValue
30 Nov 14₹10,000
30 Nov 15₹10,877
30 Nov 16₹12,092
30 Nov 17₹12,779
30 Nov 18₹13,427
30 Nov 19₹13,004

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 13 Dec 19

DurationReturns
1 Month 0.3%
3 Month 1.8%
6 Month 5%
1 Year -3.9%
3 Year 2.5%
5 Year 5.2%
10 Year
15 Year
Since launch 6.3%
Historical performance (Yearly) on absolute basis
YearReturns
2018 6%
2017 6.1%
2016 10.1%
2015 8.3%
2014 10.9%
2013 9%
2012 11.2%
2011 10.7%
2010 5.9%
2009
Fund Manager information for UTI Short Term Income Fund
NameSinceTenure
Sudhir Agarwal25 Oct 126.43 Yr.

Data below for UTI Short Term Income Fund as on 31 Oct 19

Asset Allocation
Asset ClassValue
Cash17.15%
Debt82.85%
Debt Sector Allocation
SectorValue
Corporate56.54%
Government35.37%
Cash Equivalent8.09%
Credit Quality
RatingValue
A9.09%
AA13.92%
AAA76.99%
Top Securities Holdings / Portfolio
NameHoldingValueQuantity
Syndicate Bank
Certificate of Deposit | -
9%₹199 Cr2,000,000,000
Punjab National Bank
Debentures | -
8%₹184 Cr1,870
↓ -130
Net Current Assets
Net Current Assets | -
8%₹170 Cr00
STATE BANK OF INDIA
Debentures | -
7%₹156 Cr1,500
REC LIMITED
Debentures | -
6%₹137 Cr1,328
Larsen And Toubro Limited
Debentures | -
6%₹126 Cr1,228
Bank Of Baroda
Debentures | -
6%₹126 Cr1,250
Housing Development Finance Corporation Limited
Debentures | -
5%₹102 Cr1,000
HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED (HUDCO)
Debentures | -
5%₹101 Cr1,000
National Bank For Agriculture And Rural Development
Debentures | -
4%₹98 Cr950

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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