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Best Low Duration Mutual Funds

Low duration funds fall under the category of debt funds, and they invest in short-term debt securities, where the duration of the fund portfolio is between a period of 6 months to 12 months.

When these funds are compared to overnight or even liquid funds, Low duration funds will hold assets for a longer time period and lower credit quality. This means they have a higher interest rate risk and credit risk in comparison. You can take a look at the best low duration funds given in the table below.

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List of Low Duration Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Sundaram Low Duration Fund
DebtLow to Moderate7.3%5₹514
UTI Low Duration Fund
DebtLow to Moderate7.2%5₹2,629
Aditya Birla Sun Life Low Duration Fund
DebtModerate7.6%4₹12,149
Nippon India Low Duration Fund
DebtLow to Moderate7.4%4₹5,804
Axis Treasury Advantage Direct Fund
DebtLow to Moderate7.4%4₹5,464
HSBC Low Duration Fund
DebtLow to Moderate7.7%4₹418
Mahindra Manulife Low Duration Fund
DebtModerate7.6%4₹561
SBI Magnum Low Duration Fund
DebtModerate7.4%4₹10,285
PGIM India Low Duration Fund
DebtLow to Moderate7.2%4₹103
HDFC Low Duration Fund
DebtModerate7.8%3₹16,714
Baroda BNP Paribas Low Duration Fund
DebtModerate7.5%3₹227
Mirae Asset Low Duration Fund
DebtModerate7.4%3₹594
Tata Treasury Advantage Fund
DebtLow to Moderate7.3%3₹2,349
LIC MF Low Duration Fund
DebtLow to Moderate7.3%3₹1,415
JM Low Duration Fund
DebtLow to Moderate7.3%3₹250
View All

Who Should Invest in Low Duration Mutual Funds?

The investors who can comfortably invest in these funds are:

  1. Investors who Hold a 3+ Month Investment Horizon

Low duration funds are found to be the most suitable for investors with an investment horizon of over three months. Investors who have a very short investment horizon are better off making investments in overnight or liquid funds.

The 3-month holding period ensures the best returns and performance of the fund. Investors could use them to temporarily park surpluses from property sales, annual bonuses, and so on or to accumulate cash for short-term financial purposes.

  1. Investors Seeking Regular Income

Low duration funds generate consistent income through a combination of interest and capital gains. Investors with a moderate risk tolerance can devote a portion of their portfolio to these funds and use a SWP to generate an income stream.

  1. Investors Seeking Alternatives to Bank Deposits

Low duration funds may be more appealing to investors with a modest risk appetite than bank deposits because they provide better liquidity and have the potential to achieve larger market-linked returns.

Factors to Consider While Investing in Low Duration Funds

The major factors to be considered when finding the top low duration funds for investment are-

  1. Taxation: Though they are short-term funds, the capital gains earned from Low duration funds will be taxed. Though the dividend is not taxed, capital gains are taxed according to how long the investor holds the units of the fund. 
  2. Historic Returns: Rather than being amazed by the most recent return statistic, investors should look at previous years' returns to ensure that the fund has consistently done well.
  3. Expense Ratio: Expense ratios in Low duration funds are often low. But still, it is critical to monitor this parameter because it affects the final investment return. An increase in the expense ratio, whether sudden or gradual, must be analyzed and comprehended, or it can take a big chip off your returns.

Major Advantages

Here are some major advantages of investing in top low duration mutual funds –

Active risk management: Fund managers actively optimise portfolios as per market conditions to offer optimal returns.

Higher returns: The best low duration mutual funds generate higher returns than few other types of debt funds. They take on greater credit risk and invest in shorter maturity bonds that offer better performance.

Moderate risk: Low duration funds involve moderate risk as they do not hold securities for more than 6 – 12 months. Hence, these funds are notably less vulnerable to inflation risks and interest rate risks. 

Mode of investment: There are two investing methods for low duration mutual funds, lump sum, and SIP. The former is self-explanatory, and the latter is an instalment scheme via which you can deposit funds in regular intervals.

Being a debt fund, the best low duration mutual funds have a lower risk-return ratio than equity funds. However, it may invest in low-rated debt securities to yield higher returns, making it more risk-prone than other types of debt funds.

Risks Involved While Investing in Low Duration Mutual Funds

The risks to consider while finding and investing in the top low duration mutual funds for your portfolio are-

  1. Exposure to Low-Quality Debt: These funds could have exposure to low-quality funds, which can cause the fund's value to drop, and the investor will either have to choose between selling out at a loss or holding their units at the discounted value. 
  2. It is Subject to Volatility: These Low duration funds are actively managed to generate returns. Therefore, the fund value will be subject to some kind of volatility. 
  3. Interest Rate Risk: Investors must be aware of this interest rate risk and ensure that it corresponds to their risk tolerance and aims.

FAQs

Q1. What is meant by a low duration fund?

Low duration funds are investment schemes ranging from 6 to 12 months. They are a little volatile in nature when compared to ultra-short funds but are relatively much safer than equity funds. 

Q2. What are the advantages of Low duration funds?

These funds are beneficial when there are falling interest rates, and in the case of rising interest rates, these funds cut the duration period to reduce capital losses and earn higher interest rates through new purchases. These funds are deemed to be the most suitable for investors who have a medium risk appetite. 

Q3. When should I invest in a Low duration mutual fund?

If you have the investment horizon of staying invested for a period of 6 to 12 months, you can benefit from investing in these funds. Also, given that they have a lower volatility, they can be a good alternative to bank accounts. 

Q4. Do short-term funds provide better returns than an FD?

Yes, these funds have low risks and are also known to provide better returns than bank fixed deposits for the same tenure. 

Q5. What are the underlying assets of Low duration funds?

These funds invest in a broad variety of assets, such as money market securities, government securities, hybrid instruments, corporate bonds, and more.

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Let's have a closer look

Now let us jump and check about these top 15 mutual fund schemes.

Sundaram Low Duration Fund Direct Growth

Fund Performance: The Sundaram Low Duration Fund has given 8.43% annualized returns in the past three years and 5.28% in the last 5 years. The Sundaram Low Duration Fund comes under the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Low Duration Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹514Cr
1Y Returns7.3%

UTI Low Duration Fund Direct Growth

Fund Performance: The UTI Low Duration Fund has given 7.49% annualized returns in the past three years and 4.78% in the last 5 years. The UTI Low Duration Fund comes under the Debt category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Low Duration Fund via lump sum is ₹500 and via SIP is ₹500.

Min Investment Amt₹500
AUM₹2,629Cr
1Y Returns7.2%

Aditya Birla Sun Life Low Duration Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Low Duration Fund has given 6.18% annualized returns in the past three years and 6.84% in the last 5 years. The Aditya Birla Sun Life Low Duration Fund comes under the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Low Duration Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹12,149Cr
1Y Returns7.6%

Nippon India Low Duration Fund Direct Growth

Fund Performance: The Nippon India Low Duration Fund has given 6.06% annualized returns in the past three years and 6.36% in the last 5 years. The Nippon India Low Duration Fund comes under the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Low Duration Fund via lump sum is ₹500 and via SIP is ₹100.

Min Investment Amt₹500
AUM₹5,804Cr
1Y Returns7.4%

Axis Treasury Advantage Direct Fund Growth

Fund Performance: The Axis Treasury Advantage Direct Fund has given 5.91% annualized returns in the past three years and 6.46% in the last 5 years. The Axis Treasury Advantage Direct Fund comes under the Debt category of Axis Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Axis Treasury Advantage Direct Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹5,464Cr
1Y Returns7.4%

HSBC Low Duration Fund Direct Growth

Fund Performance: The HSBC Low Duration Fund has given 5.9% annualized returns in the past three years and 5.98% in the last 5 years. The HSBC Low Duration Fund comes under the Debt category of HSBC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HSBC Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹418Cr
1Y Returns7.7%

Mahindra Manulife Low Duration Fund Direct Growth

Fund Performance: The Mahindra Manulife Low Duration Fund has given 5.87% annualized returns in the past three years and 6.29% in the last 5 years. The Mahindra Manulife Low Duration Fund comes under the Debt category of Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mahindra Manulife Low Duration Fund via lump sum is ₹1,000 and via SIP is ₹500.

Min Investment Amt₹1,000
AUM₹561Cr
1Y Returns7.6%

SBI Magnum Low Duration Fund Direct Plan Growth

Fund Performance: The SBI Magnum Low Duration Fund has given 5.81% annualized returns in the past three years and 6.28% in the last 5 years. The SBI Magnum Low Duration Fund comes under the Debt category of SBI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in SBI Magnum Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹10,285Cr
1Y Returns7.4%

PGIM India Low Duration Fund Direct Plan Growth

Fund Performance: The PGIM India Low Duration Fund has given 5.27% annualized returns in the past three years and 2.06% in the last 5 years. The PGIM India Low Duration Fund comes under the Debt category of PGIM India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in PGIM India Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹103Cr
1Y Returns7.2%

HDFC Low Duration Fund Direct Plan Growth

Fund Performance: The HDFC Low Duration Fund has given 6.12% annualized returns in the past three years and 6.76% in the last 5 years. The HDFC Low Duration Fund comes under the Debt category of HDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HDFC Low Duration Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹16,714Cr
1Y Returns7.8%

Baroda BNP Paribas Low Duration Fund Direct Growth

Fund Performance: The Baroda BNP Paribas Low Duration Fund has given 5.83% annualized returns in the past three years and 6.35% in the last 5 years. The Baroda BNP Paribas Low Duration Fund comes under the Debt category of BNP Paribas Mutual Funds.

Min Investment Amt₹5,000
AUM₹227Cr
1Y Returns7.5%

Mirae Asset Low Duration Fund Direct Growth

Fund Performance: The Mirae Asset Low Duration Fund has given 5.75% annualized returns in the past three years and 5.8% in the last 5 years. The Mirae Asset Low Duration Fund comes under the Debt category of Mirae Asset Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹594Cr
1Y Returns7.4%

Tata Treasury Advantage Direct Plan Growth

Fund Performance: The Tata Treasury Advantage Fund has given 5.71% annualized returns in the past three years and 5.07% in the last 5 years. The Tata Treasury Advantage Fund comes under the Debt category of Tata Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Tata Treasury Advantage Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹2,349Cr
1Y Returns7.3%

LIC MF Low Duration Fund Direct Growth

Fund Performance: The LIC MF Low Duration Fund has given 5.66% annualized returns in the past three years and 5.61% in the last 5 years. The LIC MF Low Duration Fund comes under the Debt category of LIC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in LIC MF Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹1,415Cr
1Y Returns7.3%

JM Low Duration Fund Direct Plan Growth

Fund Performance: The JM Low Duration Fund has given 5.62% annualized returns in the past three years and 5.42% in the last 5 years. The JM Low Duration Fund comes under the Debt category of JM Financial Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in JM Low Duration Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹250Cr
1Y Returns7.3%

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