Understanding short term debt mutual funds for secure investments
Are you looking for a safe yet rewarding investment option for your short term financial goals? Short term debt mutual funds just might be the answer. These short term funds invest in high quality debt instruments such as government bonds, CDs and corporate bonds that come with a balanced mix of short term stability and returns. Let us explore what short term debt funds are and how they perform in the current market:
Short duration or short term mutual funds are a type of debt fund that invests in securities that have a maturity period between 1-3 years. These funds provide capital to companies with a good track record of repaying their loans on time and which have sufficient cash flow to support the borrowing. The focus on high quality borrowers makes these funds relatively safer than other categories of mutual funds.
The following are a few of the best performing short term debt mutual funds that you can choose to invest in:
The Nippon India Short Term Fund currently has a net asset value of Rs. 53.63 and have provided returns since inception at the rate of 8.13% per annum. The fund size is Rs. 6,974 crores and it has a low expense ratio of 0.37%. With a focus on top rated borrowers, this fund has consistently outperformed its category average and has largely reduced the default risks.
The UTI Short Duration Fund has an NAV of Rs. 31.70 and offers returns of 7.42% per annum since its inception. The fund has total assets under management of Rs. 2,884 crores, with a relatively low expense ratio of 0.38%. The minimum amount for an SIP investment into this fund is Rs. 500 and for a one-time lumpsum investment is Rs. 10,000. This fund is quite popular for its strong returns and lower volatility.
Bank of India Short Term Income Fund has provided a return of 6.73% per annum since its inception. It currently has a net asset value of Rs. 26.94 and a relatively smaller fund size of around Rs. 72 crores. Moreover, it also comes with an expense ratio of 0.50%, a minimum SIP investment amount of Rs. 1,000, and Rs. 5,000 for lump sum investments.
The ICICI Prudential Short Term Fund currently has a NAV of Rs. 61.41 and has provided its investors with returns of 8.55% per annum since its inception. It has a total fund size of Rs. 19,611 crores and a comparatively low expense ratio of 0.45%. Moreover, it is known for its consistent returns and performs very well in different market conditions.
The table below compares the key elements of the top performing short duration debt funds in India:
Fund Name | Net Asset Value | 1 Year Returns | Expense Ratio | AUM (in crores) | Minimum Investment (SIP) | Risk Level |
Nippon India Short Term Fund | Rs. 53.63 | 8.57% | 0.37% | Rs. 6,974 | Rs. 105 | Moderate |
UTI Short Duration Fund | Rs. 31.70 | 8.54% | 0.38% | Rs. 2,884 | Rs. 500 | Moderate |
Bank of India Short Term Income Fund | Rs. 26.94 | 7.91% | 0.50% | Rs. 72 | Rs. 1,000 | Moderate |
ICICI Prudential Short Term Fund | Rs. 61.41 | 8.45% | 0.45% | Rs. 19,611 | Rs. 1,000 | Moderate |
Also read: What Is Systematic Withdrawal Plan (SWP)
Short duration debt funds are a great option if you can commit your money for a period of one year to three years. They usually ensure higher returns than traditional fixed deposits yet maintain and manage the risk levels. This is ideal for conservative investors and those with short term financial goals. Moreover, these funds provide stability and tax efficiency. However, it is also important to consider factors such as tax implications, credit quality, and interest rate sensitivity to make informed investment choices.
Use tools such as a Mutual Fund Calculator to plan effectively and always compare mutual funds before investing. Explore the all in one Bajaj Finance mutual fund platform with over 1,000 mutual fund schemes and start investing in mutual funds today.
Short term debt mutual funds invest in securities with maturities ranging from 1 to 3 years. They focus on high quality debt instruments, such as government bonds and corporate bonds for stability and moderate returns.
These funds provide better returns than traditional fixed deposits while keeping risk levels manageable. They are suitable for conservative investors who want to meet certain short term financial goals.
You should keep in mind factors such as the tax implications, credit quality of the underlying securities, and its sensitivity to interest rate changes before investing in a short term debt fund.
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