Know Your Investments
An overnight fund is a type of debt mutual fund that predominantly invests in very short-term debt instruments with maturities of one day. It offers low-risk and high liquidity.
An Overnight Mutual Fund scheme will maturity of 1 day.
- Overnight funds invest in short-term instruments like Tri-Party Repo, aiming for stable returns in line with overnight interest rates. The portfolio prioritizes high liquidity and low-risk securities, ideal for capital preservation and minimal exposure to market fluctuations.
Liquid funds are a type of mutual fund that invests in short-term, highly liquid debt instruments. Known for stability and safety, they offer easy redemption, making them suitable for short-term.
A Liquid Mutual Fund will have maturity of up to 91 days only.
- Liquid funds invest in short-term debt instruments for high liquidity and capital preservation. The low-risk allocation ensures stability, catering to investors with short-term horizons who seek easy access to funds.
A Money Market Fund is a type of mutual fund that invests in short-term, high-quality debt instruments such as Treasury bills and commercial paper. It offers liquidity and capital preservation.
A Money Market Mutual Fund will have maturity up to 1 Year.
- Money Market Funds invest in low-risk, highly liquid debt instruments, emphasizing capital preservation and liquidity. Ideal for conservative investors, they offer stability and short-term options with minimal risk exposure.
Ultra Short Duration Funds are mutual funds that invest in short-term debt securities with a slightly longer duration than liquid funds. They aim for higher returns while maintaining liquidity and low risk.
An Ultra Short Duration Fund will have Macaulay duration of the portfolio between 3 months - 6 months
- Ultra Short Duration Funds invest in short-term debt like certificates of deposit and commercial paper. Balancing higher returns with liquidity, these funds suit short-term investments with a moderate risk profile.
Macaulay duration of the portfolio between 1 year - 3 years
Short Duration Funds are mutual funds that invest in a mix of short to medium-term debt instruments.
They aim to provide higher returns than ultra short-term funds with controlled interest rate risk.
- Short Duration Funds invest in a mix of short to medium-term debt, optimizing returns while managing interest rate risk. Ideal for investors seeking a balance between yield and moderate risk.
Medium Duration Funds are mutual funds that invest in a mix of medium-term debt instruments. These funds aim to provide a balance between moderate risk and potential for higher returns.
A Medium Duration Fund will have a Macaulay duration of portfolio between 3 years - 4 years.
- Short Duration Funds invest in short to medium-term debt, optimizing returns while managing interest rate risk. Suitable for investors seeking a balance between yield and moderate risk exposure.
Medium to Long Duration Funds are mutual funds that invest in a combination of medium to long-term debt instruments. These funds aim for a balance between moderate risk and potential returns.
A Medium to Long Duration Mutual Fund scheme will have Macaulay duration of the portfolio between 4 - 7 years.
- Medium to Long Duration Funds invest in a mix of medium to long-term debt, optimizing returns while managing interest rate risk. Suitable for moderate risk-tolerant investors with a medium to long-term horizon.
Long Duration Funds are mutual funds that primarily invest in long-term debt instruments, aiming to provide higher returns by capitalizing on interest rate movements. These funds are sensitive to interest rate changes.
A Long Duration Mutual Fund scheme will have Macaulay duration of the portfolio greater than 7 years.
- Long Duration Funds focus on long-term debt instruments, capitalizing on interest rate movements for optimal returns. Ideal for high-risk-tolerant investors with a long-term horizon due to sensitivity to interest rate changes.
Low Duration Funds are debt mutual funds that invest in short to medium-term debt instruments, aiming for higher returns than liquid funds while maintaining relatively low interest rate risk.
A Low Duration fund will have Macaulay duration portfolio between 6 months- 12 months.
- Low Duration Funds invest in short to medium-term debt instruments, offering slightly higher returns than liquid funds with a moderate risk profile. Suitable for investors with a short to medium-term horizon.
Who Should Invest In Debt Mutual Funds
Gilt Funds are mutual funds that predominantly invest in government securities (gilts). These funds offer safety and stability, with returns influenced by interest rate movements and government policies.
A Gilt Fund Mutual Fund scheme will have a Minimum 80% in G-secs, across maturity.
- Gilt Funds focus on government securities (gilts) for safety and stability, considering them low risk. Aimed at providing a secure investment with returns influenced by interest rate movements.
Banking and PSU Funds are mutual funds that predominantly invest in debt and money market instruments issued by banks and public sector undertakings (PSUs). They aim for stability and income.
- Banking and PSU Funds allocate assets to debt instruments from banks and PSUs, emphasizing stability and regular income. A diversified portfolio of high-quality debt securities aims to provide safety, liquidity, and income.
A Floater Fund is a type of mutual fund that primarily invests in floating-rate instruments. These funds aim to provide returns that adjust with changes in prevailing interest rates, enhancing income potential.
- Floater Funds invest in floating-rate instruments with interest rates adjusting to market rates. A mix of floating-rate debt securities, including bonds and money market instruments, aims to provide income adapting to changes in interest rates.
Dynamic Bond Funds are mutual funds with a flexible investment approach, allowing fund managers to adjust the portfolio's duration and allocation based on changing interest rate expectations and market conditions.
A Dynamic Bond Mutual Fund scheme will have Investment across duration.
- Dynamic Bond Funds adapt portfolio duration and composition based on interest rate outlook. Investing in a range of fixed-income instruments, including government securities and corporate bonds, aims to dynamically optimize returns and manage interest rate risk.
Credit Risk Funds are mutual funds that invest in lower-rated debt instruments, exposing investors to higher credit risk. These funds aim for higher returns but carry increased default risk.
A Credit Risk Mutual Fund scheme will have a minimum of 65% investment in corporate bonds, only in AA and below rated corporate bonds.
- Credit Risk Funds invest in lower-rated debt instruments, exposing investors to higher credit risk. Aimed at higher returns, these funds carry an increased default risk, with a minimum of 65% investment in AA and below rated corporate bonds.
Corporate Bond Funds are mutual funds that primarily invest in a diversified portfolio of corporate bonds. These funds provide income through interest payments and aim for potential capital appreciation.
A Corporate Bond Mutual Fund scheme will have minimum 80% investment in corporate bonds only in AA+ and above rated corporate bonds.
- Corporate Bond Funds allocate predominantly to a diversified portfolio of corporate bonds, seeking regular income through interest payments and potential capital appreciation. Aimed at income-focused investors, the allocation balances yield and credit risk with a moderate risk tolerance.
A Gilt Fund with a 10-year constant duration is a mutual fund that maintains a fixed maturity profile, investing in government securities to capture returns based on interest rate movements over a 10-year period.
A Gild Fund with 10-year constant duration will have a minimum 80% in G-secs.
- A Gilt Fund with a 10-year constant duration primarily allocates assets to government securities, aiming to match a fixed maturity of 10 years. This focused strategy helps investors capture returns based on interest rate movements, providing stability and income with a defined investment horizon.
Types of Mutual Funds
EQUITY
Equity funds primarily invest in stocks, aiming for capital appreciation, offering growth and higher returns while also subjecting investors to market volatility and risk.
HYBRID
Hybrid mutual funds allocate investments across both stocks and bonds, balancing risk and return for investors seeking diversified exposure.
SOLUTION ORIENTED
Solution-oriented mutual funds target specific financial goals, offering tailored investment strategies to meet long-term objectives.
OTHERS
Other funds include index funds replicating market indices and FOFs investing in other mutual funds, providing diversified investment options.
