Low Duration funds are the open-ended debt mutual funds which invest in money markets and debt securities, with Macaulay duration between 6 to 12 months. The maturity period for these mutual funds is comparatively higher than the liquid and ultra-short term funds.
Who Should Invest in Low Duration Funds?
Low duration funds are considered as one of the best investment options for investors who are not willing to risk their investments.
- Investors having any kind of repugnance for volatile funds should invest in these funds for a short-term and still earn better returns on investment than savings accounts
- The returns generated under Low Duration funds are, typically, stable and steady. The average returns accrued by these funds is 6.5 to 8.5 per cent p.a.
- In case the interest rates move up, the funds will bear capital losses
Expenses Ratio in Low Duration Funds
According to the norms of Securities and Exchange Board of India (SEBI), maximum 1.05% expense ratio is applied on the Low Duration Funds.
List of Low Duration Funds in India
Here is a list of the best Low Duration Funds available in India with the best rolling returns recorded over the last 1, 3 and 5 years:
Under these mutual funds, Short-term Capital Gains (STCG) are taxed on the basis of the income slab of the investor. On the other hand, no tax is applied on the dividend but 20% tax after the benefit of indexation is applied in the case of Long-Term Capital Gains (LTCG).
Tax Treatment for Low Duration funds
A large number of investors indulge into savings accounts instead of investing into Mutual funds because of the market risk. However, Low duration funds are liquid as well as less risky which makes them suitable for individuals who are conservative about their resources. And at the same time these funds helps investors gain from interest rate changes and higher returns.