Low Duration Mutual Funds

Low-duration mutual funds invest in debt securities for a short time frame. As an investor, you will get stable income from this type of mutual fund as it possesses low risk and lower chances of capital losses due to changes in interest rates.

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Higher returns than other liquid funds

Higher returns than other liquid funds

Less volatile than other debt funds

Less volatile than other debt funds

Better alternative than FDs and bank accounts

Better alternative than FDs and bank accounts

Feasible short short-term investment plan

Feasible short short-term investment plan

List of Best Low Duration Mutual Funds Based on Last 3-Year Returns

Fund Categories
ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedDSP Investment Managers Private LimitedIDFC Asset Management Company LimitedHSBC Asset Management(India)Private LtdCanara Robeco Asset Management Co. Ltd.Franklin Templeton Asst Mgmt(IND)Pvt LtdEdelweiss Asset Management LimitedInvesco Asset Management (India) Private LtdQuant Money Managers LimitedMirae Asset Mutual FundPPFAS Asset Management Pvt. LtdSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdMotilal Oswal Asset Management Co. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.PGIM India Asset Management Private LimitedLIC Mutual Fund Asset Management LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.Fund PineBridge Mutual FundJM Financial Asset Management LimitedBaroda Asset Management India LimitedUnion Asset Management Co. Pvt. Ltd.Principal Asset Management Private LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundWhiteOak Capital Asset Management LimitedBajaj Finserv Asset Management Limited360 ONE Asset Management LimitedBank of India Investment Managers Private LimitedITI Asset Management LimitedNJ Asset Management Private LimitedNavi AMC LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdTrust Asset Management Private LimitedHelios Capital Asset Management (India) Private LimitedGroww Asset Management Ltd.Taurus Asset Management Company LimitedShriram Asset Management Co LtdZerodha Asset Management Private LimitedOld Bridge Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund


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What are Low Duration Mutual Funds?

Low-duration funds are an open-ended debt schemes that invest the corpus in the money market and debt instruments for a duration(inclusive of maturities) ranging 6 to 12 months. These mutual funds are ideal for low-risk investors with a short-term investment horizon. In addition, low-duration mutual funds offer stable returns with low risk and volatility due to changes in the market. 

There are no restrictions on the type or credit quality of debt assets to be held by low-duration funds. Hence these funds invest in a wide range of securities, including money market securities, government securities, corporate bonds, securitized debt, hybrid instruments like REITs, permitted derivatives, or other mutual fund units.

Why Add Low Duration Mutual Funds to Your Portfolio?

  • Offers an average annual return of around 7%
  • Have lower risk than other debt funds
  • Offers better returns than different bank accounts and fixed deposits
  • Ideal for investors wanting a regular income
  • A good option for investors with a shorter investment horizon

Advantages of Investing in Low Duration Mutual Funds

Investing in low-duration mutual funds allows you to earn better returns in the short term. Here are some key advantages of investing in low-duration mutual funds.

  • Balanced Risk

    Investing in low-duration mutual funds carries a moderate interest risk level, as the investment duration with maturities is up to 12 months. Therefore, these mutual funds are less prone to interest rates and inflation risks.

  • Enhanced Returns

    Usually, low-duration mutual funds outcompete liquid funds & ultra short-duration funds as they can take increased credit and duration exposure. 

  • Less Volatile

    Low-duration mutual funds are less volatile than other debt mutual funds as these funds have a duration of 12 months or less.

Who Should Invest in Low Duration Mutual Funds?

Low-duration mutual funds are ideal for investors with a 3+ month’s investment horizon and moderate or low-risk appetite. You can invest in these funds if you fall under the following investors’ category:

  • Investors with an Investment Horizon of 6 Months

    These mutual funds are ideal for investors with an investment horizon between 6 to 12 months. If you are seeking a very short-term investment horizon, you must invest in liquid or low-risk overnight mutual funds. Hence, investors who want to accumulate funds for short-term financial goals must invest in these mutual funds.

  • Investors Wanting an Alternative to Bank Deposits

    Investors looking for an alternative to bank deposits can invest in low-duration mutual funds as these funds offer better liquidity. In addition, these mutual funds have the potential to earn higher returns related to the market.

  • Investors Wanting Regular Income

    Low-duration mutual funds provide regular income to investors through capital gains and interest income. Investors with a moderate level of risk appetite can allot a portion of their portfolio to these funds and opt for a Systematic Withdrawal Plan (SWP) to create a regular income flow.

Points to Consider Before Investing in Low Duration Mutual Funds

Before you start investing in low-duration funds, you must consider the following factors to earn feasible returns.

  • Financial Goal

    Before investing in low-duration mutual funds, you must analyse your financial goals. It will help you choose the funds that best meet your financial requirements.

  • Investment Horizon

    You must invest in low-duration mutual funds if you have one year of investment horizon. In case you have a low investment horizon, you must choose ultra-short, overnight or liquid funds.

  • Risk Tolerance

    Although low-duration mutual funds are low-risk investments, market volatility and interest rate fluctuations can be risky. Hence, you must consider the risk factors before investing in low-duration mutual funds.

  • Fund’s Performance

    You must analyse the fund's past performance in varying market situations before investing in these funds. In addition, you must compare and evaluate the low-duration mutual funds with its benchmark and peers.

  • Expense Ratio

    When you invest in mutual funds, the fund house charges a fee called expense ratio for managing your portfolio. You must compare the expense ratios of different funds and invest in the low-duration mutual funds that have low expense ratios.

Limitations of Investing in Low Duration Mutual Funds

Here are some of the disadvantages of investing in low-duration mutual funds that you must be aware of.

  • Limited Investment Horizon

    Since low-duration mutual funds are suitable for investors with medium or short-term investment horizons, investors having long-term financial goals must look for other investment options.

  • Interest Rate Dependency

    Low-duration funds’ performance can depend on the existing interest rate environment. In such situations, the funds will perform better in a rising interest rate environment and may underperform in a declining interest rate environment.

  • Average Quality Debt Instruments

    These funds may expose investors to average-quality funds, reducing the fund’s value. In such a situation, the investor has to choose between selling the units or holding them at a discounted value.

How to Invest in Low Duration Mutual Funds Through INDmoney?

If you are seeking the best low-duration mutual funds to invest in 2024, you can invest in the top low-duration mutual funds through INDmoney. Follow these simple steps to start investing:

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).

  • Step 2

    Once your Free investment account is ready, you can either search for Low Duration Mutual Funds or go to the mutual fund section and tap on Debt Funds Catalog. 

  • Step 3

    Choose a Low Duration Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUMExpense ratios and underlying stocks and sectors.

  • Step 4

    You can choose to set up SIP in Low Duration Mutual Funds or even invest as lumpSum. Once you are on the individual Low Duration Mutual Funds page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan.

  • Step 5

    Choose the amount that you want to invest as SIP or LumpSum. 

  • Step 6

    Set up payments. If you choose to set up SIP in Low Duration Mutual Funds,  you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

Should You Invest in Low Duration Mutual Funds?

Overall, low-duration mutual funds are debt funds which primarily invest in debt securities and money markets. If your investment horizon is between 6 and 12 months, you must invest in these funds as they provide higher interest rates than liquid and overnight funds. In addition, it will help you get a regular income and achieve short-term financial goals.

Frequently Asked Questions

If you have an investment portfolio between 6 and 12 months, you can get better returns by investing in low-duration mutual funds. In addition, these funds are less volatile, which can be a better alternative to bank deposits.

Low-duration mutual funds invest in a wide range of assets, such as government securities, money market securities, corporate bonds, hybrid instruments and more.

Yes, low-duration mutual funds are less risky and offer better returns than fixed deposits for the same period.

The primary difference between low-duration and ultra-low-duration funds is the funds' investment duration. Ultra-low-duration mutual funds have a maximum investment horizon of 6 months, whereas low-duration funds have an investment horizon between 6 and 12 months.

To invest in low-duration mutual funds online, you can visit the INDmoney website and create your profile to start investing. On this platform, you can choose the best low-duration mutual fund according to your preference and financial goals. 

Here are some notable features of low-duration mutual funds:

  • Distribution of Regular Income: Investing in low-duration mutual funds will enable you to receive regular income distributions on a monthly or quarterly basis. 
  • Risk Ratio: The best low-duration fund reduces or eliminates the investors’ risks as the duration is short. 
  • Ease of Access: Low-duration mutual funds are easy to access in terms of liquidity.

Low-duration mutual funds are taxed in the following two ways:

  • Short-Term Capital Gain (STCG): If you hold these funds for less than 36 months, it is taxed at the income tax slab rate applicable to you. 
  • Long-Term Capital Gain (LTCG): However, if you hold these funds for 36 months or more, the tax rate will be 20% with indexation benefits.

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