Home Mf Research Category Best Short Term Mutual Fund
Mutual Fund Types

Short Term Debt Fund

Franklin Templeton Mutual Fund
Franklin India Short term Income Plan - Retail Plan - Segrd PF 2(10.90% Vodafone Idea Ltd 02Sep2023 GR)

1Y

308.94%

3Y

1776.27%

5Y

223.09%

SI

404.78%

Nav

352.04

Risk

-
Franklin Templeton Mutual Fund
Franklin India Short term Income Plan - Institutional Plan - Segrd PF 2(10.90% Vodafone Idea 02Sep2023-Growth)

1Y

219.50%

3Y

1606.95%

5Y

211.09%

SI

383.11%

Nav

291.37

Risk

-
Franklin Templeton Mutual Fund
Franklin India Short Term Income Plan - Retail Plan - Growth

1Y

192.10%

3Y

79.50%

5Y

32.46%

SI

12.36%

Nav

15,041.28

Risk

-
Franklin Templeton Mutual Fund
Franklin India Short Term Income Plan - Institutional Plan - Growth

1Y

192.03%

3Y

79.42%

5Y

32.39%

SI

13.68%

Nav

12,430.00

Risk

-
TAURUS MUTUAL FUND
Taurus Short Term Income Fund - Fixed Maturity Plan - I I - Fixed Maturity Plan - I I

1Y

29.61%

3Y

13.11%

5Y

5.05%

SI

27.42%

Nav

12.79

Risk

-
TAURUS MUTUAL FUND
Taurus Short Term Income Fund - Fixed Maturity Plan - I - Fixed Maturity Plan - I

1Y

21.58%

3Y

24.86%

5Y

9.29%

SI

37.41%

Nav

15.59

Risk

-
Edelweiss Mutual Fund
Edelweiss Short Term Fund - Segregated Asset - Growth

1Y

17.75%

3Y

8.51%

5Y

3.32%

SI

15.54%

Nav

11.78

Risk

-
SUNDARAM MUTUAL FUND
SUNDARAM SHORT TERM DEBT FUND - REGULAR PLAN - PRINCIPAL UNITS

1Y

12.81%

3Y

8.13%

5Y

5.52%

SI

-1.51%

Nav

18.17

Risk

-
SUNDARAM MUTUAL FUND
SUNDARAM SHORT TERM DEBT FUND - REGULAR PLAN - GROWTH

1Y

12.80%

3Y

8.13%

5Y

5.52%

SI

6.91%

Nav

36.38

Risk

-
Canara Robeco Mutual Fund
Canara Robeco Short Term Fund - Institutional Plan - Growth

1Y

12.13%

3Y

14.63%

5Y

9.63%

SI

8.80%

Nav

18.43

Risk

-

A Short-Term Debt Fund is a category of debt mutual fund that primarily invests in fixed-income instruments, such as corporate bonds, government securities, commercial papers, and certificates of deposit, with shorter maturity periods. These funds generally maintain a Macaulay duration of between 1 and 3 years, making them less sensitive to interest rate changes compared to medium- or long-duration debt funds.

These funds aim to provide steady and predictable returns with lower volatility, which makes them a popular alternative to fixed deposits or savings accounts for conservative investors seeking slightly higher returns without taking excessive risks.

Who Should Consider This Fund

Short-term Debt Funds are suitable for investors with an investment horizon of 1 to 3 years who seek capital preservation, moderate returns, and minimal interest rate risk. These funds appeal especially to those who:

  • Want to park surplus funds temporarily.
  • Are looking for better returns than traditional bank fixed deposits.
  • Need liquidity without significant risk to capital.
  • Prefer low to moderate risk exposure.

These funds are also helpful as part of a diversified debt strategy, helping to balance longer-duration or riskier debt funds in a portfolio.

Risks and Return Potential

Short-term Debt Funds are low- to moderate-risk investment vehicles. Because of their shorter average maturity, they carry limited interest rate risk, making them more stable during rate hike cycles. However, they can be exposed to credit risk, depending on the instruments selected by the fund manager.

Typical returns range from 6% to 7.5% annually, influenced by market conditions, credit quality, and interest rate trends. These funds offer good liquidity and lower volatility than long-term funds. This makes them a good choice for conservative investors.

From a tax view, profits on units held for under three years are short-term capital gains. The tax depends on the investor's income slab. If you have an asset for more than 3 years, the tax authorities tax long-term capital gains at 20%. This includes indexation, which helps maintain your post-tax gains at a higher level.

Benefits of Short-Term Debt Funds

  • Lower Volatility: These funds are less sensitive to changes in the interest rate due to their shorter maturity profile.
  • Better Liquidity: Perfect for short-term financial goals or emergency funds.
  • Capital Preservation: While not guaranteed, the risk of capital loss is minimal if high-credit-quality instruments are selected.
  • Tax Efficiency: Holding investments for more than three years offers favorable tax treatment through indexation.

Things to Keep in Mind Before Investing

  • Examine the credit profile of the instruments held—higher returns may indicate a higher credit risk.
  • These funds are not suited for very short-term needs (less than 6 months); ultra-short or liquid funds may be better alternatives.
  • Compare historical risk-adjusted performance and expense ratios before selecting a scheme.
  • They may underperform in environments with sharply falling interest rates compared to longer-duration funds.
Frequently asked questions
What is a Short-Term Debt Fund?
What kind of returns can I expect?
Are these funds safe?
What is the ideal investment horizon?
Can I lose money in a Short-Term Debt Fund?
Is it better than a fixed deposit?
Can I invest via SIP or lumpsum?
What is the difference between short-term and ultra-short-term debt funds?
Who should avoid these funds?
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