What Are Different Types Of Debt Funds
How To Invest In Debt Funds
You can generally invest in a debt fund using two methods:
In case you have a considerable amount of money you wish to invest in one go, the lumpsum method is preferable. If you get a significant corpus of money, this is an appropriate option. However, you must choose a fund type basis your investment horizon or your goal.
If you want to invest smaller portions of money at regular intervals, a Systematic Investment Plan can be a suitable alternative, use the SIP calculator to calculate returns on your investment. This is better matched for employees who receive a regular salary each month. Investing through the SIP route enhances your investment discipline while reducing your risk through rupee cost averaging which helps to buy more units when prices are low and less units when prices are high.
Stable Returns On Investment
Almost all short-term funds are debt funds, which have been classified on the basis of the holding period. Debt funds are more reliable than equity funds as they put your money in fixed income securities such as Government Securities, Corporate Bonds, Treasury Bulls, and Money Market Instruments .
As a result, short-term debt mutual funds have the capacity to generate a fixed rate of return for a predetermined date of maturity. Further, the best short duration funds of India are generally immune to the capital market movement.
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What Is The Risk Associated With Short Term Funds
Short term funds are subject to interest rate and credit risks. Bond price have inverse relationship with interest rates. Bond prices fall when interest rate goes up and vice versa. The interest rate risk in short term funds are moderate because the average duration of these funds are between 1 to 3 years. Bond prices are negatively impacted by credit risks. Bond prices fall when the credit rating is downgraded. If a bond defaults investors may not get the principal amount back. Credit risk of a short term fund depends on the credit quality of the bond portfolio of the scheme.
Hdfc Short Term Debt Fund Returns
NAV or Net Asset Value is the per-unit price of the Mutual Fund. The NAV of a Mutual Fund changes every day. It is calculated by taking the current value of the holdings of the fund at end of the day, subtracting the expenses, and dividing the value by the number of units issued to date.
The NAV of HDFC Short Term Debt Fund for Feb 11, 2022 is 26.0807.
HDFC Short Term Debt Fund has an ET Money Rank of # 5 of 22 and a consistency rating of 4.
This indicates the fund has delivered above-average returns with exceptional consistency. All this means HDFC Short Term Debt Fund can be a good addition to your portfolio
On ET Money, Investing in HDFC Short Term Debt Fund is fast, easy, and 100% paperless. And it takes only minutes. Here is what you need to do –
The Expense Ratio of the direct plan of HDFC Short Term Debt Fund is 0.29%. .
The AUM of HDFC Short Term Debt Fund is 17,368 Crs.
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Our investing reporters and editors focus on the points consumers care about most how to get started, the best brokers, types of investment accounts, how to choose investments and more so you can feel confident when investing your money.
The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal.
What Is A Money Market Fund
A money market fund is a kind of mutual fund that invests in highly liquid, near-term instruments. These instruments include cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term maturity . Money market funds are intended to offer investors high liquidity with a very low level of risk. Money market funds are also called money market mutual funds.
While they sound similar in name, a money market fund is not the same as a money market account . A money market fund is an investment that is sponsored by an investment fund company. Therefore, it carries no guarantee of principal. A money market account is a type of interest-earning savings account. Money market accounts are offered by financial institutions. They are insured by the Federal Deposit Insurance Corporation , and they typically have limited transaction privileges.
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How A Money Market Fund Works
Money market funds work like a typical mutual fund. They issue redeemable units or shares to investors, and they are mandated to follow the guidelines drafted by financial regulators ).
A money market fund may invest in the following types of debt-based financial instruments:
- Bankers’ Acceptances short-term debt guaranteed by a commercial bank
- Certificates of deposit bank-issued savings certificate with short-term maturity
- Repurchase agreements short-term government securities
- U.S. Treasuriesshort-term government debt issues
Returns from these instruments are dependent on the applicable market interest rates, and therefore, the overall returns from the money market funds are also dependent on interest rates.
What Are Short Duration Funds
Short duration funds are debt mutual fund schemes which invest in debt and money market securities such that the Macaulay Duration of the scheme is 1 to 3 years. The investment objective of these funds is income generation through accrual over the maturity term of the instruments in the scheme portfolio. These funds have moderately low interest rate risk. The credit risk of short duration funds may vary from scheme to scheme depending on the credit quality of the underlying instruments.
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Online Savings Account Or Money Market Account
Potential interest rate: around 0.5%
NerdWallets current analysis shows annual percentage yields for high-yield online savings accounts and money market accounts paying between 0.4% and 0.6%. This may not sound like much, but its higher than 0.06%, the current national average interest rate on savings accounts, according to the Federal Deposit Insurance Corp. and what youll likely be offered at your hometown branch.
Both savings and money market accounts are FDIC-insured, meaning your money is protected in the event of a bank failure up to $250,000 per institution, per depositor.
What Makes A Good Short
Good short-term investments may have many things in common, but they are typically characterized by the following three traits:
- Stability: Good short-term investments dont fluctuate too much in value, as many stocks and bonds do. The money will be there when you need it, and is often protected by FDIC insurance or a government guarantee.
- Liquidity: A good short-term investment usually offers high liquidity, meaning that you can access the cash invested in it quickly. In the case of certain investments such as CDs, youll know when the money becomes available, and you can always redeem the CD, though it will often come with a penalty.
- Low transaction costs: A good short-term investment doesnt cost a lot of money to get into or out of, unlike a house, for example. Thats especially important when yields on short-term investments are at historical lows.
These features mean that your money will not be at risk and will be accessible when you need to use it, which is one of the major reasons to have a short-term investment. In contrast, you can earn a higher return on long-term investments but must endure more short-term volatility. If you need that money, though, you might have to sell at a loss to access it fully.
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Taxation On Equity Oriented Investments:
Funds having its portfolio exposure of 65% and above in equities, It is considered as Equity Fund for taxation purposes. If you redeem your units within 12 months from the date of purchase, it will be treated as Short term capital gain. STCG tax @ of 15% will be applicable on such gains.Overall income corresponding to specific income tax slab category is not considered for STCG taxation of equity-oriented schemes. Cess and Surcharges will be applicable as per the prevailing rate.
If you redeem your SIP units after 12 months from the date of purchase, it will be treated as Long term capital gain. LTCG tax @ of 10% will be applicable on such gains on Equity oriented schemes. Earnings upto Rs1 lakh per year is exempted from tax. Indexation benefit is not given to the investors on such earnings.
Cess and Surcharges will be applicable as per the prevailing rate.
Hdfc Short Term Debt Fund
DEBT SHORT DURATION
Mr. Kalkundrikar has done B.Com, CA, CFA, and MBA from Columbia Business School.
Prior to joining Nippon India Mutual Fund, he has worked with HDFC Asset Management Company Limited where he has handled multiple roles in Investment ??? Equity function such as Portfolio Management for PMS business, & performing Equity research in various sectors such as Consumer Staples, Consumer Discretionary, Retail, Construction Materials.
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Money Market Mutual Funds
Dont confuse a money market mutual fund with a money market account. While theyre named similarly, they have different risks, though both are good short-term investments. A money market mutual fund invests in short-term securities, including Treasurys, municipal and corporate debt, as well as bank debt securities. And since its a mutual fund, youll pay an expense ratio to the fund company from the assets being managed.
Risk: While its investments are generally safe, money market funds are not as safe as money market accounts, which are FDIC-backed. In contrast, money market funds can lose money, typically only in periods of severe market distress, but they are generally quite safe. Still, they are some of the most conservative investments available and should protect your money.
Liquidity: Money market mutual funds are reasonably liquid, and you can access your money readily. They may allow you to write checks off the fund, though youre typically limited to six withdrawals per month.
What Is A Mutual Fund
A mutual fund is an investment that pools money from investors to purchase stocks, bonds and other assets. A mutual fund aims to create a more diversified portfolio than the average investor could on their own. Mutual funds have professional fund managers buy securities for you.
» Do your investments need a home? NerdWallet’s roundup of the best brokers for mutual funds
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Nippon India Mutual Fund
- Address: 4th Floor, Tower A, Peninsula Business Park,Ganapatrao Kadam Marg,
National Bank For Agriculture & Rural Development
ICICI Prudential Life Insurance Company Ltd.
Housing Development Finance Corpn. Ltd.
Reliance Ports and Terminals Ltd
L& T Infrastructure Finance Co. Ltd.
John Deere Financial India Pvt. Ltd.
G R Infra Projects Ltd.
National Thermal Power Corp. Ltd.
Indian Railway Finance Corpn. Ltd.
Import external investments on ET Money to:
- Manage all your investments in one place
- View and track fund details, updates and more
- Switch to direct and earn upto 1% extra returns
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The Nippon India Short-term Fund is a 9 yrs 1 m old fund and has delivered average annual returns of 8.54% since inception.
What Factors One Should Look In A Short Term Fund Before Investing
Investors should look at expense ratio , duration and credit quality of a short term fund before investing. Higher TER will impact scheme returns and hence lower TER is preferable. Longer the duration of a fund, more sensitive it will be to interest rate changes. You should select funds according to your risk appetite. Credit quality is one of the most important factors to be considered when investing in short term funds. Though lower rated bonds give higher yields, the risk of making a loss is also higher. You should try to invest in funds with high credit quality.
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About Axis Short Term Fund
- Axis Short Term Direct Fund-Growth returns of last 1-year are 5.01%. Since launch, it has delivered 8.58% average annual returns. The fund has doubled the money invested in it every 9 yrs.
- Axis Short Term Direct Fund-Growth scheme’s ability to deliver returns consistently is higher than most funds of its category. Its ability to control losses in a falling market is high.
- The fund’s credit profile is high indicating it has lent to borrowers whose quality is great. Most funds in this category lend to better borrowers and hence the risk of default in this fund is higher than the category.
- The fund’s top holdings are in National Bank For Agriculture & Rural Development, GOI, State Bank of India, Axis Money Market Fund Direct – Growth, Mahindra Rural Housing Finance Ltd..
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Disclaimer: Products compared like fixed deposits may provide fixed guaranteed returns. Mutual Funds investments are subject to market risk, read all scheme related documents carefully. Past performance is not an indicator of future returns.
What Are The Benefits And Risks Of Mutual Funds
Mutual funds offer professional investment management and potential diversification. They also offer three ways to earn money:
- Dividend Payments. A fund may earn income from dividends on stock or interest on bonds. The fund then pays the shareholders nearly all the income, less expenses.
- Capital Gains Distributions. The price of the securities in a fund may increase. When a fund sells a security that has increased in price, the fund has a capital gain. At the end of the year, the fund distributes these capital gains, minus any capital losses, to investors.
- Increased NAV. If the market value of a funds portfolio increases, after deducting expenses, then the value of the fund and its shares increases. The higher NAV reflects the higher value of your investment.
All funds carry some level of risk. With mutual funds, you may lose some or all of the money you invest because the securities held by a fund can go down in value. Dividends or interest payments may also change as market conditions change.
A funds past performance is not as important as you might think because past performance does not predict future returns. But past performance can tell you how volatile or stable a fund has been over a period of time. The more volatile the fund, the higher the investment risk.
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