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A Medium To Long Duration Fund is a debt mutual fund that invests in debt instruments having a medium and long-term investment horizon. The Macaulay duration of the fund ranges between 4 and 7 years.
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A type of open-ended debt mutual fund, Medium To Long Duration Funds invest in debt securities in such a manner that the Macaulay duration of the portfolio lies between 4 and 7 years, making it suitable for medium to long-term investors.
Offers stable returns on investment
Low volatility risk since the fund primarily invests in debt and money market securities
There’s no capping on the maximum investment amount
Returns from these funds can go up to 10% p.a.
You can get better returns compared to fixed deposits while minimising investment risks
Check the expense ratio of such schemes. A high ratio eats into the fund’s returns and should be avoided
Compare Medium To Long Duration Funds on their returns. A fund with the highest return is better
These funds face high interest rate risks since they invest in long-term debt securities which might fall in value if interest rates are cut.
Risk of default on the debt instrument
Risk of rising interest rates, which reduces the value of debt instruments
Risk of inflation reducing the returns from the debt fund
Risk of not being able to trade in debt instruments
Returns earned are taxed at your income tax slab rates
Dividends earned, if any, are taxed at your income tax slab rate
Earn dividends on your investment at regular intervals
Accumulate the returns over the investment tenure and get a lump sum amount on redemption
Medium To Long Duration Funds invest in debt securities and money market instruments such as treasury bills, government securities, commercial paper, non-convertible debentures, etc.
You can redeem your Medium To Long Duration Fund online either by logging into your demat account or through your account on the Aditya Birla Capital website.
The investment horizon for Medium To Long Duration Funds is 4 to 7 years.
Yes, Medium To Long Duration Funds can be a good option for new investors with financial goals spanning up to 7 years who are looking for better return potential than fixed-income instruments.
As per the 2023 Budget, Medium To Long Duration Funds are not eligible for tax savings.
The average rate of returns for Medium To Long Duration Funds has been 5-8%.
Medium To Long Duration Funds are better than short duration funds if your investment horizon is more than 4 years and you are ready for the interest rate risk that comes with them.
No, there is no exit load on Medium To Long Duration Funds.
Investors looking for a better return potential than fixed-income instruments but less risk than equity and with financial goals spanning 4-7 years should invest in Medium To Long Duration Funds.
Medium To Long Duration Funds carry the interest rate risk that all debt funds do, apart from the risk of market fluctuations throughout the investment tenure.
Medium To Long Duration Funds invest in debt securities with a medium to long-term maturity profile, typically ranging from 3 to 7 years.
Medium To Long Duration Funds work by investing primarily in debt instruments with varying maturities, aiming to generate income and capital appreciation over the medium to long term.
Medium To Long Duration Funds are typically considered moderate to high-risk investments due to their exposure to interest rate fluctuations and credit risks associated with longer-duration bonds.
The Macaulay duration for Medium To Long Duration Funds typically falls within the range of 4 to 8 years, reflecting the weighted average maturity of the fund's underlying bond holdings.
Medium To Long Duration Funds are taxed based on the investor's holding period. Short-term capital gains (STCG) tax applies if the holding period is less than three years, while long-term capital gains (LTCG) tax applies for holdings over three years, taxed at 20% with indexation benefits.
Timing entry and exit in Medium To Long Duration Funds involves assessing interest rate expectations, economic conditions, and the fund's performance outlook. Investors may consider entering when interest rates are expected to fall and exiting when rates are anticipated to rise.
Accrual income in Medium To Long Duration Funds refers to the interest income generated by the fund's underlying securities over time. It contributes to the fund's total returns and can be influenced by factors such as the credit quality and duration of the bonds held in the portfolio.