Investment Avenue: Top short duration funds for wealth preservation

Henil Shah
Investment Avenue: Top short duration funds for wealth preservation

With the US Fed being aggressive and the RBI likely to follow suit, short-duration funds are a good place to deposit short-term money.

The US Fed appears to have taken note of this factor, and the year ahead appears to be one of policy normalization, even as bond markets continue to imply the same. So far, the Reserve Bank of India's (RBI) opinion has been fairly dovish. In the future, policy normalization may still necessitate intermittent bond market interventions to manage the rate of pass-through and to align with the frequently voiced objective for an orderly development of the yield curve.  

 

The year ahead will thus likely be one of this transition and hence will likely continue to throw up significant volatility. Therefore, for parking short-term money or actively managing your fixed-income portfolio, invest in funds that are low on duration. Even at this stage adding a floater fund is also likely to benefit as it moves along with interest rates rather than against it.  

 

The credit space is significantly better, although the spreads are often rather low, especially when contrasted to the comparatively greater term spreads available. Given this, and the likelihood of continuing volatility as the year progresses, we continue to favour corporate bond funds with lower end duration and short-duration funds.  

 

Following is the list of top five short-duration funds that you can consider to park your short-term money. 

 

Trailing Returns (per cent)

3-Month

6-Month

1-Year

3-Year

5-Year

Nippon India Short Term Fund

0.7

2.2

4.6

7.6

6.7

Axis Short Term Fund

0.6

1.9

3.7

7.7

7.0

HDFC Short Term Debt Fund

0.6

2.0

3.8

8.0

7.5

Aditya Birla Sun Life Short Term Fund

0.6

2.0

3.9

7.7

6.9

ICICI Prudential Short Term Fund

0.5

1.9

3.7

7.9

7.0

Returns above 1-Year are annualised.

 

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