Short Duration Funds Compare

Additional Useful Information

• An investor can buy “Units” of these Short Duration Mutual Funds. These units can be purchased at a price which is called the “Net Asset Value” or “NAV”. The NAV of these funds keeps changing daily depending upon the interest earned from the fixed income securities of the companies that are held by them.

• The investor can sell these units anytime at the NAV price prevailing on the day of the sale.

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• The fund house which issues a Short Duration Mutual Fund may offer two options to select from –
• IDCW Option – In this option, growth in the mutual fund value is distributed back to the investor’s bank account in the form of periodic payouts called “Dividends” or “Payouts”.
• Growth Option – In this option, growth in the mutual fund value is invested back in the fund for further growth. The investor’s gains are in the form of higher NAV price of the units of the fund.

• Several types of Mutual funds, if redeemed / sold within a certain short period of time, charge a nominal fee (called the Exit Load) for this early redemption.

• Short Duration Mutual Funds are considered a good investment option for those with a medium investing horizon of about 1 to 3 years.

Returns *

• Short Duration Mutual Funds do not guarantee any returns. However, the probability of negative returns is low.

• Over the most recent 5-year period, the average returns were 4% to 8% per year.

Risk Level

• Short Duration Mutual Funds are categorized as low-risk investments since they invest in fixed income securities.

• However, it is always worth looking at the individual securities that these funds invest in along with their respective credit ratings. This varies from fund to fund.

Liquidity

• Short Duration Mutual Funds are considered very liquid.

• Redemption and settlement period is quick in Debt Funds. Investors will receive their money within 1 business day (T+1).

Interesting Facts

• Short Duration Funds are more exposed to Interest Rate Risk. Since the duration is longer (1 to 3 Years), the probability that interest rates change is higher. As interest rates rise, bond prices drop and hence, there is a capital loss contributing negatively to the NAV. However, if interest rates drop, bond prices rise and hence, there is a capital gain contributing positively to the NAV.

• The fund manager can invest in lower-rated debt to earn higher yields.

Tax Implications

• When investors sell their Short Duration Mutual Fund units, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• In case of Capital Gain, this amount is to be added to the taxable income of the investor and taxes are required to be paid based on the applicable tax slab.

• There is no tax in case of “Capital Loss”.

• Any dividends/payouts received by investors from Short Duration Mutual Funds are also to be added to their total taxable income and taxes are required to be paid as per the income tax slab.

Where To Invest

• https://www.etmoney.com/mutual-funds/debt/short-duration/54

• https://groww.in/blog/short-term-debt-funds-to-invest