Invest in Best Low-Duration Mutual Funds in India 2024
Explore the top performing Low duration mutual funds in India. Learn the advantages to make informed decisions.
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What is Low Duration Mutual Fund?
Low Duration Mutual Fund is designed for investors who are looking for short term capital appreciation opportunities. These funds are typically invested in debt and money-marketing instruments for a period of six to 12 months.
Who Should Invest in Low Duration Mutual Funds?
- Conservative Investors: Those who prefer lower risk and stable returns. It is ideal to investors who are looking for alternatives to Bank deposits
- Short-Term Investors: Ideal for investors with a short-term investment horizon of three months atleast
- Emergency Fund: Suitable for individuals looking to park their emergency funds due to their liquidity and low-risk nature.
- Portfolio Diversification: Investors looking to diversify their portfolios with debt instruments.
Top 5 Low Duration Mutual funds
| Fund name | Category | Risk | 6 months return | 1 year returns | Rating | Fund Size in crores |
| ICICI Prudential Savings Fund | Low Duration | Moderate | 3.98% | 7.76% | 5/5 | 19172 |
| Tata Treasury Advantage Fund | Low Durations | Low to Moderate | 3.69% | 7.04% | 4/5 | 2319 |
| LIC MF Low Duration Fund | Low Duration | Low to Moderate | 3.52% | 6.67% | 4/5 | 1486 |
| DSP Low Duration Fund | Low Duration | Low to Moderate | 3.70% | 7.01% | 4/5 | 4315 |
| Mirae Asset Low Duration Fund | Low Duration | Low to Moderate | 3.67 | 6.69% | 3/5 | 616 |
Factors to Consider While Investing in Low Duration Mutual Funds
- Credit Quality: Check the credit ratings of the funds before proceeding to invest
- Interest Rate Movements: Be aware of interest rate trends as they affect the performance of debt funds. Rising rates can impact your returns
- Expense Ratio: A lower expense ratio can lead to higher net returns for investors.
- Fund Performance: Review the historical performance of the fund to gauge its consistency and stability.
- Fund Manager’s Experience: A seasoned fund manager with a good track record can handle all kinds of fluctuations in the market
Major Benefits of Investing in Low Duration Mutual Funds
- Lower Risk: These funds are less volatile compared to equity funds, making them suitable for risk-averse investors.
- Liquidity: Easy to redeem, making them suitable for emergency funds.
- Stable Returns: Generally provide more stable returns than long-duration funds, especially in a rising interest rate environment.
- Diversification: Helps diversify an investment portfolio by adding debt instruments.
Risks Involved in Low-Duration Mutual Funds
- Credit Risk: Risk of default by the issuers of the underlying securities.
- Lower quality funds: At times, you may get exposed to low quality funds which may affect your returns
- Inflation Risk: Returns might not always keep pace with inflation, affecting the real value of returns.
- Market Risk: Though minimal, these funds are still subject to market fluctuations
FAQ on Low-Duration Mutual Funds
1. What is meant by a low duration fund?
Low Duration funds are those funds that are ranging from 6 months to 12 months. They are little volatile compared to ultra-short funds but relatively safer than equity funds
2. What are the advantages of low duration funds?
Low Duration funds invest in debt sources which have minimal impact of interest rate-fluctuations compared to long-term bonds.
3. Do low duration funds provide better returns than a FD?
Yes, low duration funds are low-risk investment avenues and provide better returns than a bank fixed deposit for the same period
4. When can I invest in Low Duration Mutual fund?
When you have an idea of having stayed invested on a horizon for 6 to 12 months, you can benefit from investing in these funds. Since they are good on handling volatility, they emerge as a much better option than bank deposits
5. How do changes in interest rates affect low-duration mutual funds?
Low-duration mutual funds are less sensitive to interest rate changes compared to long-term debt funds. However, rising interest rates can still lead to a decrease in value of fund’s existing debt securities
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