What is the difference between long term and short term debt funds?
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What is the difference between long term and short term debt funds?
Short-term financing is usually aligned with a company’s operational needs. It provides shorter maturities (3-5 years) than long-term financing, which makes it better-suited for fluctuations in working capital and other ongoing operational expenses.
What are the types of debt funds?
Debt Funds are categorized as follows:
- Overnight Funds – invest in 1-day maturity papers (securities)
- Liquid Funds – invest in money market instruments maturing within 90 days Floating Rate Funds – invest in floating rate debt securities.
- Ultra-Short Duration Funds – invest in debt securities maturing in 3-6 months.
Are debt funds short term?
The defining feature of Short-term Debt Funds is that though they are a mutual fund scheme, these funds have a much shorter maturity period or holding period, which is usually below a term of 3 years.
Which debt fund is good for short term?
| Mutual fund | 5 Yr. Returns | |
|---|---|---|
| HDFC Corporate Bond Fund – Direct Plan – Growth | 7.79\% | Invest Now |
| HDFC Medium Term Debt Fund – Direct Plan – Growth | 7.64\% | Invest Now |
| ICICI Prudential Short Term Fund – Direct Plan – Growth | 7.85\% | Invest Now |
| Kotak Banking and PSU Debt Fund – Direct Plan – Growth | 7.82\% | Invest Now |
How do you choose debt mutual funds?
Parameters to Pick the Best Debt Fund
- Average Maturity/Duration.
- Interest Rate Scenario.
- Current Yield or Portfolio Yield.
- Credit Quality of Portfolio.
- Assets Under Management (AUM)
- Expense Ratio.
What is Ultra short term fund?
Ultra short duration funds are fixed income mutual fund schemes which invest debt and money market securities such that the Macaulay Duration of the scheme portfolio is 3 months to 6 months.
What is liquid fund?
Liquid funds are a class of debt funds that invest in short-term fixed-interest generating money market instruments. Treasury bills, commercial paper, and so on are some of the examples of the underlying securities in the portfolio of a liquid fund.
What is the difference between liquid and ultra short term funds?
These liquid funds are as liquid as your savings bank account and give 200 basis points higher return. Ultra Short Term Funds or USTFs are again a classification based on maturity. They invest in bonds with a residual maturity of less than one year.
What are the taxation rules for ultra short-term funds?
Since both ultra short-term funds and liquid funds are a part of the debt funds; the taxation rules are same for both of them. If both the funds are sold within three years from the date of purchase, then Short Term Capital Gain (STCG) is applicable which is charged as per the individual’s tax slab.
What is exit load in case of ultra short term funds?
Exit load in case of ultra short term fund is generally applicable if the redemption is done within a short period of time. Since both ultra short-term funds and liquid funds are a part of the debt funds; the taxation rules are same for both of them.
What is ultraultra short term fund?
Ultra short term fund is a category of debt fund that invests its corpus in fixed income securities. The fund’s portfolio maturity tenure extends between 91 days and normally less than 1 year. These schemes were earlier referred as Liquid Plus Funds.