What Are Low Duration Funds?
Securities and Exchange Board of India (SEBI) recategorised mutual fund schemes in 2017. Three major categories were created- Equity funds, Debt funds, and Hybrid funds. The idea was to ease investor decision-making as many mutual fund companies had introduced many schemes. View More
Who Should Invest in Low Duration Funds?
Retail investors usually invest with a financial goal in mind that should be fulfilled at the maturity of the fund. For example, a father may begin setting aside money every month for his child’s higher education ten years from today. Investing with a goal in mind helps determine the investment horizon and the risk that the investor can take. Investors’ best low duration funds are funds with a shorter investment horizon and a lower risk preference.
Features of Low Duration Funds
The best low duration funds invest in debt securities like money market instruments, bonds, G-Secs (government securities), etc. View More
Taxability of Low Duration Funds
Most investors think of tax benefits when investing in the best low duration funds. Mutual funds can be taxed based on their gains. Gain on selling a mutual fund scheme is classified into two types- Short Term Capital Gains and Long-Term Capital Gains. Gains depend on the holding period. The minimum holding period of a debt mutual fund as per tax rules of India is three years. View More
Risk Involved With Low Duration Funds
Interest Rate Risk
Interest rate risk exists in all types of debt funds, although at different levels. Interest rate risk is the risk that changes the fund’s value due to changes in market interest rates. Debt funds invest in debt instruments. View More
Advantages of Low Duration Funds
Liquidity
Since low duration funds invest in debt instruments with lower maturity than high duration funds, the liquidity of these funds is also higher. View More