Right now, the stock market has made things tough for regular investors. Many people who started SIPs (Systematic Investment Plans) in mutual funds over the past few years are now seeing negative returns. Because of this, a lot of investors have panicked and stopped their SIPs.
This trend actually started back in September last year. Since then, the stock market hasn’t been rising — instead, it’s been going down steadily. Because of this, many equity mutual funds have given negative returns.
However, during the last 6 months of high market volatility, short duration mutual fund schemes have performed well. These funds have given returns of up to 7.51%, which is higher than what bank FDs offer.
In fact, over the last 3 years, these short duration funds have given up to 7% returns. On the other hand, if we look at SBI’s 1–2 year FD, it is currently offering only 6.80% interest to regular customers.
What is a Short Duration Fund?
A short duration fund is a type of debt mutual fund that invests in debt instruments with a short maturity period which is usually between 1 to 3 years. These funds carry lower risk related to interest rate changes and offer more stable returns.
In simple words, it’s a scheme that mainly invests in debt products, making it safer than equity funds and giving decent average returns.
One example is the Axis Short Duration Fund. It’s an open-ended short-term debt scheme that usually invests for 1 to 3 years. This fund follows a strategy of investing in high-quality, low-risk instruments, which helps deliver steady returns.
Because of its short duration and focus on interest rates, this fund aims to provide balanced returns over time.
What’s in the Portfolio of a Short Duration Fund?
A short duration fund usually has a well-diversified portfolio, which means it spreads investments across different safe options. Investors can consider investing in this fund with a 1-year time frame in mind.
The fund mainly invests in AAA and AA+ rated assets, which are considered high-quality and low-risk. It does not invest in assets rated below AA.
These funds typically include corporate bonds, government securities, and money market instruments. Most of the investments are in corporate bonds and government securities that mature in 2 to 5 years.
There are no restrictions on individual securities, which gives the fund some flexibility in choosing where to invest.
Focus on Corporate Bonds
For example, if we look at the Axis Short Duration Fund, around 61% of its money is invested in corporate bonds, and more than 25% is in government bonds.
A big plus for investors is that there is no entry or exit load in this fund — meaning, you don’t have to pay any extra fees when you invest or withdraw.
The fund has an Asset Under Management (AUM) of ₹8,780 crore.
You can start investing with a lump sum of ₹5,000, or through monthly SIPs starting from just ₹1,000.
If someone had invested ₹10,000 in this fund at the beginning of 2013, that amount would have grown to ₹25,824 by January 31, 2025.
How Have the Returns Been?
Data shows that over the last 3 years, some fund houses in this category have given good returns. Here’s how they performed:
- ICICI Prudential: 7.02%
- HDFC: 6.60%
- Aditya Birla: 6.59%
- Axis: 6.43%
- Bandhan Fund: 6.15%
You can also take a look at the 1-year returns from these funds:
| Fund | 1-Year Return |
|---|---|
| HDFC | 7.72% |
| Axis | 7.61% |
| Nippon | 7.60% |
| Birla | 7.51% |
These numbers show that short duration funds have performed well, even in a challenging market.