Short term debt funds for short term goals

Sep 16




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Debt Funds or Debt Mutual Funds invest in fixed-income securities like government securities, debentures, corporate bonds and other money-market instruments...


Debt mutual funds can be classified as per their holding period such as short-term debt funds and long-term debt funds. The meaning of short-term debt funds is that they invest in debt and money market instruments with a Macaulay duration of the portfolio between 1 year - 3 years. Short -term debt fund returns have low volatility..

Investors who are conservative or want to keep a certain portion of their assets in fixed income bearing securities can invest in short-term debt mutual funds. Debt funds, Short term debt funds for short term goals Articles amongst themselves, have different risk profiles, which allows investors to choose funds based on their risk appetite and return expectations in these funds. Investors in debt mutual funds are exposed to inherent risks such as interest rate risk, credit risk, illiquidity risk and market risk etc. Interest rate risks refer to the risk in your investment when prices of the securities purchased move up or down due to changes in macro-economic conditions like higher inflation, higher government borrowings, adverse effect on rupee due to higher current account deficit and other global market developments. Credit risk refers to the risk, when the securities which the fund is holding get downgraded or when there is a possibility of the issuer of the security defaulting in payment of principal or interest. Market risk refers to the risk of the underlying securities cannot be liquidated at the price at which it is valued, due to markets not being deep enough to absorb the sale of the securities. Investors who want to keep their money for very short periods but looking for slightly higher return than savings account and willing to take market risk may invest in  Liquid Funds offered by mutual funds. These liquid funds are short term debt funds in nature and invest in Instruments which mature within 91 days.

So if your goal is for a very short period or if you are investing in a different asset class or you have almost reached your goal, it is generally suggested to switch to debt funds as they are less volatile than equity.

Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.

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