1. Short Duration debt fund is the new Sebi nomenclature for Short Term debt fund as per its Oct'17 circular on Rationalization and Categorization of mutual fund schemes.
2. It is an open-ended short term debt scheme which invests in Debt & Money Market instruments, where Macaulay duration of the portfolio is between 1 year and 3 years, and 30 AMCs are offering it currently.
3. Here, the risk is low while the returns are moderate, and investors with a horizon greater than 1 year can benefit from these funds in a rising interest rate scenario.
4. Within a category, there will be little difference in returns, and choosing an average debt fund in it would suffice.
5. Between two funds with similar average maturity, NAV volatility, and return, choose the one with a lower expense ratio, which is usually lesser for large-sized funds.
6. Debt funds are supposed to protect capital and also try to give some positive returns on it.
7. Maturity periods of underlying securities play a major role to fulfill these twin objectives as their returns (interest rate) differ for various terms as per demand-supply in market.
8. Therefore, unlike earlier, Sebi has now ensured that investors are not mis-sold a "general" fund for a "specific" need-based goal.
9. Hence, up to 3 years maturity funds have been segregated further into six categories, as per durations of 1 day (overnight), 91 days (liquid), 3-6 months (ultrashort), 6-12 months (low duration), upto 1 year (money market), and 1-3 years (short), for investors to exercise their own choice for "specific" needs (similarly other durations too).
10. Regarding "secured returns", debt funds are "risky" too, but when tenure is least, risk and return both are lowest, and as it increases, then risk and return tend to become higher too.
11. Basically, these funds are ideal for parking short term surplus money, to earn a daily interest income, based on market rates, providing an efficient vehicle for short-term investments, instead of letting it remain idle in a savings bank account, earning only a pittance.
2. It is an open-ended short term debt scheme which invests in Debt & Money Market instruments, where Macaulay duration of the portfolio is between 1 year and 3 years, and 30 AMCs are offering it currently.
3. Here, the risk is low while the returns are moderate, and investors with a horizon greater than 1 year can benefit from these funds in a rising interest rate scenario.
4. Within a category, there will be little difference in returns, and choosing an average debt fund in it would suffice.
5. Between two funds with similar average maturity, NAV volatility, and return, choose the one with a lower expense ratio, which is usually lesser for large-sized funds.
6. Debt funds are supposed to protect capital and also try to give some positive returns on it.
7. Maturity periods of underlying securities play a major role to fulfill these twin objectives as their returns (interest rate) differ for various terms as per demand-supply in market.
8. Therefore, unlike earlier, Sebi has now ensured that investors are not mis-sold a "general" fund for a "specific" need-based goal.
9. Hence, up to 3 years maturity funds have been segregated further into six categories, as per durations of 1 day (overnight), 91 days (liquid), 3-6 months (ultrashort), 6-12 months (low duration), upto 1 year (money market), and 1-3 years (short), for investors to exercise their own choice for "specific" needs (similarly other durations too).
10. Regarding "secured returns", debt funds are "risky" too, but when tenure is least, risk and return both are lowest, and as it increases, then risk and return tend to become higher too.
11. Basically, these funds are ideal for parking short term surplus money, to earn a daily interest income, based on market rates, providing an efficient vehicle for short-term investments, instead of letting it remain idle in a savings bank account, earning only a pittance.