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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 Short Duration Fund?
A Short Duration Fund is a type of debt mutual fund that invests in short-term debt instruments. The Macaulay duration of the fund ranges between 1 and 3 years.
Advantages of Short Duration Funds
Low volatility risks
Being debt-oriented, short duration funds have low volatility risks and offer stable returns on your investment.
Short-term investment
Short duration funds are suitable for investors with an investment horizon of 1 to 3 years who want stable growth.
Stable returns
Short duration funds offer stable returns on your investment ranging from 5% to 8%.
High Liquidity
Typically offer good liquidity, allowing investors relatively easy access to their funds within a short to medium timeframe.
Explore Short 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.
Short 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 Short Duration Funds
Table of Contents
What are short duration funds?
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A type of open-ended debt mutual fund , short duration funds are those that invest in debt and money market securities in such a manner that the Macaulay portfolio duration lies between 1 and 3 years, making it suitable for short to medium-term investors.
What are the features of short 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 range in the 5% to 8% limit
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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 short duration funds
These funds face some extent of credit risk as their values eroded in recent times when the NBFC crisis happened
Check the expense ratio of such schemes. A high ratio eats into the fund’s returns and should be avoided
Compare short 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 should be the investment horizon for short duration funds?
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Short duration funds invest in both short and long-term securities. However, exposure to long-term securities is low
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They are suitable for investors with a low to medium investment horizon
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If you want to invest for more than a year but up to 2-3 years, these funds would be a good choice
What is the tax implication of short 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 rates
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 Short Duration Funds
Short duration funds invest in debt securities and money market instruments.
Short duration funds are known as one of the safest investment choices. However, you must be aware of the market risks before investing.
The minimum investment horizon for short duration funds is 1-3 years.
As per the Union Budget 2023, the gains on short duration funds are taxed as capital gains. They could be classified as LTCG (Long Term Capital Gains) or STCG (Short Term Capital Gains) depending on the investment period.
The minimum investment horizon for short duration funds is 1 year.
Yes, there could be an exit load for a short duration fund. However, there are certain short duration funds with a zero exit load.
The Macaulay duration of low duration funds is 6-12 months, while that of short duration funds is 1-3 years.
Low duration funds are known to perform better in rising interest rate conditions.
Low duration funds are better suited for short-term financial goals, while short duration funds are good for safer investment that provides regular income.
No, as short duration funds are market-linked instruments, a minimum amount of risk is always involved. However, they do offer a considerably lower risk than equity investments.
Short duration funds can be better than FDs regarding tax efficiency as they do not attract a TDS (Tax Deducted at Source) on returns like FDs do. They attract taxes only upon redemption as per capital gains taxation rules.
No, you can withdraw your short duration fund investment at any point.
Investors with a minimum one-year horizon: Short-duration funds suit those willing to invest for at least a year, ideally 1-3 years.
Newcomers to debt funds: Start with short-duration funds for moderate-risk, market-linked returns outperforming liquid or overnight funds.
Seeking stable income: Allocate to short-duration funds for steady returns with moderate interest rate risk, using SWPs for regular income.
Exploring short-term saving: These funds offer potential returns surpassing bank deposits, benefiting from varying interest rate environments.
Assess your investment horizon, typically at least one year.
Consider your risk tolerance and investment goals.
Evaluate the fund's historical performance and consistency.
Look for funds with a strong track record of managing interest rate risk.
Compare expense ratios and other fees associated with the fund.
Check the fund manager's experience and expertise in managing short-duration funds.
Review the fund's portfolio composition and credit quality of holdings.
Consider any additional features or benefits offered by the fund, such as liquidity options or regular income distribution.
The accrual return on short duration funds is the income generated from the interest payments on the underlying debt securities. It is beneficial as it provides a steady stream of income to investors regardless of changes in market prices.
Yes, you can invest in short duration funds through SIP (Systematic Investment Plan)
Interest rate risk impacts short duration funds as they invest in debt securities with relatively shorter maturities. When interest rates rise, the value of existing bonds decreases, leading to capital losses for the fund. Conversely, when interest rates fall, bond prices rise, resulting in capital gains. Therefore, short duration funds are sensitive to changes in interest rates, which can affect their returns and NAV
Benefits of Short Duration Funds:
Suitable for funds earmarked for future use beyond 12 to 18 months
These funds typically offer superior returns compared to Bank Fixed Deposits, with risk effectively managed
One disadvantage of short duration funds is that they may not offer as high returns as longer-duration funds during periods of declining interest rates. Additionally, they are subject to interest rate risk, which can impact their returns and NAV negatively if interest rates rise.
Before investing in short duration funds, consider factors such as the fund's investment objective, portfolio composition, expense ratio, historical performance, credit quality of underlying securities, interest rate sensitivity, and the fund manager's track record. Additionally, assess your own investment goals, risk tolerance, and investment time horizon to ensure the fund aligns with your financial objectives.
Types of Debt Mutual Funds
Funds Based On Duration
Funds Based On Portfolio Allocation
Other asset class funds
Equity Fund
Give your savings the growth they deserve. Invest in Equity Funds and unlock the potential of long-term growth
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Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
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Get a mix of equity, debt and other asset classes for a diversified portfolio
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Index Fund
Passively-managed mutual funds tracking a particular index
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ETF Funds
Invest in funds listed and traded on the stock exchange