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Aditya Birla Capital LimitedAditya Birla Capital Limited (“ABCL”) is a listed systemically important non-deposit taking Non-Banking Financial Company (NBFC) and the holding company of the financial services businesses. ABCL and its subsidiaries/JVs provides a comprehensive suite of financial solutions across Loans, Investments, Insurance, and Payments to serve the diverse needs of customers across their lifecycles. Powered by over 61,600 employees, the businesses of ABCL have a nationwide reach with over 1,690 branches and more than 200,000 agents/channel partners along with several bank partners.
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What is a Medium Duration Fund?
A Medium Duration Fund is a debt mutual fund that invests in short-term debt instruments. The Macaulay duration of the fund ranges between 3 and 4 years.
Advantages of Medium Duration Funds
Good returns
You can earn good returns on investments which can be higher than fixed deposits if you stay invested.
Medium-term investment
If you want to invest for 3 years or more for any medium-term financial goal, these funds are a suitable choice.
Diversified portfolio
You get an actively managed, diversified portfolio that invests in high-quality bonds and debt instruments.
Tax-Efficient Long-Term Gains
Offer potentially lower tax on gains if held over three years (after indexation).
Explore Medium Duration Funds
Most Popular
AUM: 23427(Cr)
Risk: Very High
- MIN. INVESTMENT 500
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹10000
- Get (30 Yrs) ₹24,850*
*Projections/estimations is backtested using historical data.
Most Popular
- AUM: 23427(Cr)
- Risk: High
- MIN. INVESTMENT 1000
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹15000
- Get (30 Yrs) ₹34,850*
*Projections/estimations is backtested using historical data.
Medium Duration Funds Returns Calculator
REGULAR INVESTMENT
SIP
Invest systematically in regular amounts and build a corpus with a disciplined investing habit.
START SIPONE TIME INVESTMENT
Lump sum
Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.
INVEST LUMPSUMTotal Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
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Understanding Medium Duration Funds
Table of Contents
What are Medium Duration Funds?
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A type of open-ended debt mutual fund, Medium Duration Funds invest in debt securities in such a manner that the Macaulay portfolio duration lies between 3 and 4 years, making it suitable for medium-term investors.
What are the features of medium duration mutual funds?
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Offers stable returns on investment
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Low volatility risk since the fund primarily invests in debt and money market securities
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There’s no capping on the maximum investment amount
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Returns from these funds can go up to 10% p.a.
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You can get better returns compared to fixed deposits while minimising investment risks
Things to keep in mind when investing in Medium Duration Funds
These funds face some extent of credit risk as they invest in lesser-rated debt securities
Check the expense ratio of such schemes. A high ratio eats into the fund’s returns and should be avoided
Compare Medium Duration Funds on their returns. A fund with the highest return is better
These funds face interest rate risks since they invest in long-term debt securities, too, which might fall in value if interest rates are cut.
What are the types of risks that Medium Duration Funds face?
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Credit risk
Risk of default on the debt instrument
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Interest rate risk
Risk of rising interest rates, which reduces the value of debt instruments
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Inflation risk
Risk of inflation reducing the returns from the debt fund
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Liquidity risk
Risk of not being able to trade in debt instruments
What is the tax implication of Medium Duration Funds?
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Returns earned are taxed at your income tax slab rates
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Dividends earned, if any, are taxed at your income tax slab rate
What are the payout options?
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Dividend option
Earn dividends on your investment at regular intervals
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Growth option
Accumulate the returns over the investment tenure and get a lump sum amount on redemption
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FAQs On Medium Duration Funds
Medium Duration Funds invest in debt securities and money market instruments.
Medium Duration Funds are best for
Investors who want to avoid equity risks
Investors looking for better returns than bank deposits
Investors with a time horizon of less than 5 years
The average rate of return is 5-7%.
Yes, new investors with an investment horizon/financial goals spanning around 3-4 years can benefit well from Medium Duration Funds.
You should stay invested in a Medium Duration Fund for 3+ years.
Low risk and better returns than fixed-income instruments are the main advantages of Medium Duration Funds.
The Macaulay duration of Medium Duration Funds is between 3 to 4 years.
You can redeem your Medium Duration Fund online through either your demat account or through your Aditya Birla Capital account on our website.
No. Since Medium Duration Funds are debt funds, they carry relatively lower risk.
The main difference is the investment horizon. For a short duration fund, it is about a year, while for a Medium Duration Fund, it is 3-4 years.
Medium Duration Funds are mutual funds that invest in bonds and debt instruments with maturities ranging from 3 to 4 years, offering a balance between risk and return compared to short and long duration funds.
Before investing in a Medium Duration Fund, investors should consider factors such as their investment horizon, risk tolerance, the fund's investment objective, track record, expense ratio, and portfolio composition.
Accrual income in Medium Duration Funds refers to the interest income earned from the underlying bonds held in the fund's portfolio. It impacts Medium Duration Funds by contributing to the fund's overall return and stability, especially during periods of interest rate fluctuations.
Liquidity risk in Medium Duration Funds refers to the risk that the fund may face challenges in selling its underlying securities at fair prices due to limited market liquidity. This can impact the fund's ability to meet redemption requests from investors and may result in NAV fluctuations.
Medium Duration Funds are taxed based on the holding period of the investment. Short-term capital gains (STCG) on investments held for less than 3 years are taxed at the investor's applicable income tax slab rate, while long-term capital gains (LTCG) on investments held for more than 3 years are taxed at 20% with indexation benefits.
The biggest disadvantage of Medium Duration Funds is their susceptibility to interest rate risk. Since these funds invest in bonds with intermediate maturities, they may experience NAV fluctuations in response to changes in interest rates, potentially resulting in capital losses for investors.
Credit risk in Medium Duration Funds refers to the risk of default by issuers of the underlying bonds held in the fund's portfolio. Interest rate risk arises from changes in market interest rates, affecting the prices of the fund's bond holdings and consequently its NAV.
Yes, investors can invest in Medium Duration Funds through Systematic Investment Plans (SIPs) , which allow for regular and disciplined investment in the fund over time. SIPs help investors average their purchase costs and benefit from the power of compounding.
Types of Debt Mutual Funds
Funds Based On Duration
Funds Based On Portfolio Allocation
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