What is Low Duration Mutual Funds?

What is Low Duration Mutual Funds?

Low-duration mutual funds, also known as short-term bond funds, are a category of mutual funds that primarily invest in fixed-income securities with relatively short maturities. These funds are designed to provide investors with a balance between safety, income, and liquidity, making them a popular choice for those seeking to preserve capital while earning a higher yield than traditional savings accounts or money market funds. They offer a way to earn a competitive yield on investments while keeping interest rate risk relatively low, making them a valuable addition to an investor’s portfolio, particularly in times of economic uncertainty or when interest rates are expected to rise....

Features of Low Duration Mutual Funds

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How do Low Duration Funds Work?

1. Yield Management: Fund managers aim to maximise yield within the specified duration range, taking into account the fund’s risk parameters. This involves selecting a mix of bonds that offer competitive yields while aligning with the fund’s overall objectives....

Purpose of Low Duration Mutual Funds

1. Portfolio Composition: Low-duration mutual funds are managed by professional fund managers or investment teams. They carefully select a mix of fixed-income securities for the fund’s portfolio. These securities can include government bonds, corporate bonds, municipal bonds, certificates of deposit (CDs), and other short-term debt instruments....

Who should invest in Low Duration Mutual Funds?

The primary purposes of low duration mutual funds are as follows:...

Factors to consider before investing in Low Duration Mutual Funds

Low duration mutual funds can be a suitable investment choice for a specific group of investors who have certain financial goals, risk tolerance, and investment preferences. Here are some types of investors who may consider investing in low duration mutual funds:...

Advantages of Low Duration Mutual Funds

Before investing in low duration mutual funds or any investment vehicle, it’s essential to thoroughly evaluate your financial goals, risk tolerance, and the specific characteristics of the fund. Here are key factors to consider before investing in low duration mutual funds:...

Disadvantages of Low Duration Mutual Funds

1. Short to Medium Term Investment Horizon: These funds are suitable for investors with short to medium-term investment horizons who want to earn a competitive yield while keeping interest rate risk relatively low....