Hi in the types of mutual funds, there is a term duration, what it mean actually? For example for liquid fund it says investment in money market with maturity of 91 days, for ultra short duration it says fir 3 to 6 months & so on..
Here what this days/months/years duration means? Is it for our investment? And for ultra shot duration fund it says like 3-6 months debt fund so if we invest in such fund for like a year or more will that affect our principle amount ?
Can you explain this duration mean please?
Thanks
4 Answers
Best Answer
Hi,
As mentioned in my previous reply, the DURATION in this scenario is something to do with the Fund's portfolio of securities that they invest in.
A Liquid fund picks a debt security which matures in 90 days and after it matures, they will pick similar securities and it goes on.
As an investor, you can stay invested in a Liquid fund as long as you would like to and can expect a slightly better returns over and above your Savings bank a/c interest rate.
Hi,
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. A bond's duration is easily confused with its term or time to maturity because they are both measured in years.
Usually, the higher the duration, the more is the volatility in the prices. In other words, it is the number of years required to get the present value of future payments from a security/bond.
A Liquid fund primarily invests in a portfolio of Debt Securities which have a maturity period of say 3 months or so.
So, this tenure is from Fund's side and not the investor's side.
So as an investor does this duration means anything while choosing investment ?
And for equity the time horizon is at least 3-5 years but we can consider for long term too jusy like that For liquid fund it's for 3 months, so can we choose liquid fund to invest money for more than 3 months, for 1-2 years?
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