Articles

Latest articles on Life Insurance, Non-life Insurance, Mutual Funds, Bonds, Small Saving Schemes and Personal Finance to help you make well-informed money decisions.

Mutual Funds - What are short-term debt funds and who should buy them?

30 Jan 2019

fjrigjwwe9r3SDArtiMast:ArtiCont

Short-term debt funds belong to the category of funds defined by Sebi as short duration funds that hold debt and money market securities with a duration of one to three years.

These funds predominantly hold debentures and bonds of companies, financial institutions, central and state governments and government-sponsored enterprises. They may also hold some money market instruments such as commercial paper and certificates of deposit and others for liquidity and to benefit when yields are good. The terms to maturities of the instruments held will be such that the duration of the portfolio will not be more than three years.

These funds earn returns from two sources: interest income and gains/loss on the price of the securities in the portfolio. The interest income is known and earned periodically. Any appreciation in the price of the securities adds to the interest income. But a fall in price leads to a loss that will reduce the total returns in the fund. The price of debt securities go up when interest rates fall and vice-versa. The extent of gain or loss in price depends on the duration—higher the duration, greater is the impact. 

The returns from these funds are typically not very volatile. However, they are not suited for investors parking funds for immediate use where they would not like to see even a slight and temporary fall in net asset values (NAVs). These are best suited for investors looking to earn more than just interest income and are okay with some interim volatility in the NAV.

Source: Live Mint BACK

To be added soon

Priyanshu B. Tanna

SEBI registered IFA

ARN119467 & EUIN E-183966

To be added soon

Bharat Tanna

SEBI registered IFA

ARN26176 & EUIN E-044509

To be added soon

Kundan B. Tanna

SEBI registered IFA

ARN294073 & EUIN E-553599

Risk factor

Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performances of any Mutual Fund Scheme may or may not be sustained in future. There is no guarantee that the investment objective of any suggested scheme shall be achieved. All existing and prospective investors are advised to check and evaluate the Exit loads and other cost structure (TER) applicable at the time of making the investment before finalizing on any investment decision for Mutual Funds schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a Trailing Commission on client investments. Disclosure For Commission earnings is made to clients at the time of investments. Option of Direct Plan for every Mutual Fund Scheme is available to investors offering advantage of lower expense ratio. We are not entitled to earn any commission on Direct plans. Hence we do not deal in Direct Plans.

Copyright © 2025 Design and developed by Fintso. All Rights Reserved