Types of Debt Funds

Types of Debt Funds

Debt funds are categorized based on the length of the investment horizon- liquid/money market funds have the shortest horizon, short term funds have a horizon of 6-12months and long term funds have a horizon greater than 1 year. Investors also have the choice of fixed maturity plans (FMP) that have a fixed tenure where investors are locked in till maturity but have the benefit of capital protection.

Liquid/Money market funds

These funds provide liquidity at a day’s notice. The money is invested in treasury bills, and money market instruments that can be liquidated at one day’s notice. The returns of liquid funds are typically lower, as compared to funds that have a longer investment horizon.

Ultra short term/short term funds

Investors with investment horizon of 6 months to 1 year can choose ultra short term/short term funds (USTs). The maturity of money market instruments in UST is higher than the liquid funds so the return is also marginally higher.

For Illustration

HDFC Short Term Opportunities Fund (Debt Fund)

Launch Date - June 25, 2010
Returns since launch - 9.01%
Fund Manager - Anil Bamboli
Trailing Returns (%) 6-month 1-Y 3-Y 5-Y
Fund 2.96 8.53 8.90 9.07
Category 2.55 9.01 8.95 8.86


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