I wish to invest in short term debt funds. I have short listed some short term funds. I have mailed its comparison sheet I have prepared Pl. rank above three funds as per your opinion. You may suggest name of some short term debt funds which you feel better for my investment goal.
My observations are as under
1)Birla short term fund is having better Average maturity & Modified duration but Birla treasury optimizer is having better risk ratios.
2)For Franklin Low duration, returns & Risk ratios are better but its credit Quality( As per VRO) is not as good as other two funds. Also in Morning star its downside capture ratio is not available Also its R square is indicated as 23.
Franklin low duration fund is to be considered as Ultra short term debt fund or Short term debt fund
My investment horizon is of 4 years. Now a days debt funds are not at all doing well but over period of 3 to 4 years I hope I should get better return than FDs,pl. comment.
5 Answers
Hi,
I believe that Franklin low duration fund has better data on most of the parameters when compared to other Funds' data. The credit quality is rated as MEDIUM and not poor as per VRO.
As your time-frame is around 4 years and if you can afford to stomach some risk, you may consider Franklin fund.
You may consider it as Short term debt fund.
As given in Franklin T website : '
- Franklin India Low Duration Fund aims to provide steady returns by investing in a mix of money market and short term debt instruments while maintaining a low duration
Thanks for the reply.
As I have to select two debt funds for lumsum investment, Apart from Franklin Low duration, ,I am planing to select Ultra short term fund in view of better security or less risk.Is there any harm in investing in Ultra short term DEbt fund for 4 years?
Hi,
There is no harm as such, as long it meets your investment objectives, its fine!
A short term holding is categorised as a period of six months to three years. Investors who prefer to earn higher returns than those accrued from bank fixed deposits and have a higher appetite for risks can profit from investing in short term debt funds. The current interest rate volatilities and the every changing, short cycles of interest rates make short term debt funds a better investment option that most other mutual funds. However, such funds should be selected by keeping the Interest rate versus credit risk factor in mind.
Short term debt funds either take interest rate risks or credit risks. Interest rate risks refer to the fund manager’s act of escalating or reducing the average maturity based on interest rate outlooks. Stock prices fall when interest rate rises and vice versa. On the other hand, a credit risk is taken when fund managers invest 40% to 50% in instruments with credit ratings of AA or below. When the rating of these debt funds goes up, their debt price increases as well.
Regards,
Kamlesh Patel
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