If you want to invest just for 3 years, then a Short Term bond Fund is the ideal plan to consider. short term bond Funds invest in debt instruments & money market instruments that include government papers (G-secs) and commercial papers (CPs). These funds are highly suitable investors with a low-risk appetite who seek quick returns and a steady flow of Income without being affected by the daily changes in the bond markets.
As the bond market offers the advantage of falling interest rates, one can earn better returns by increasing the duration of the investment. This is where Short Term Bond Funds come in. These funds invest in debt market to offer long-term returns over the duration of 2-3 years. Investors who are keen to invest in these funds, following are the top rated schemes to invest in.
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Fund NAV Net Assets (Cr) Rating 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2020 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Information Ratio Exit Load PGIM India Short Maturity Fund Growth ₹36.2977
₹37 ☆☆☆☆☆ 0.9 2.3 3.5 3.8 7.8 4.71% 1Y 9M 4D 2Y 1M 6D -0.73 0-6 Months (0.5%),6 Months and above(NIL) Baroda Pioneer Short Term Bond Fund Growth ₹23.447
₹265 ☆☆☆ 1 2.2 4.1 7.2 7.5 5.05% 2Y 3M 22D 2Y 9M 7D -1.34 0-15 Days (0.25%),15 Days and above(NIL) Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 22 Oct 21 Note: Ratio's shown as on 30 Sep 21
Fincash has employed the following parameters for shortlisting the top performing funds:
Past Returns: Return analysis of last 3 years
Parameters & Weights: Information ratio with some modifications for our ratings and rankings
Qualitative & Quantitative Analysis: Quantitative measures like average maturity, credit quality, expense ratio, etc., including fund age and the size of the fund has been considered. Qualitative analysis like the reputation of the fund along with the fund manager is one of the important parameters that you would see in the listed funds.
Asset Size: The minimum AUM criteria for short term bond funds are INR 100 Crores with some exceptions at times for new funds that are doing well in the market.
Performance with Respect to Benchmark: Peer average
Some of the important tips to consider while Investing in short term bond funds are:
Investment Tenure: Investors planning to invest in short term bond funds should stay invested for minimum one year.
Invest via a SIP: SIP or Systematic Investment plan is the most efficient way to invest in a Mutual Fund. They not only provide a systematic way of investing, but also ensures regular investment growth. You can invest in a SIP with an amount as low as INR 500.
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