A common goal many investors share is to invest their money for an extended period of time in a way that helps them minimize risk and earn stable returns. Among the various investment options available, long duration mutual funds can help investors preserve capital while remaining invested for an extended period. Read on as we take a look at the best long duration mutual funds, what they are, and key factors to consider while investing in them.
A long duration mutual fund is a debt mutual fund that invests in various debt securities with a maturity period of over 5-7 years. These funds primarily invest in government securities, corporate bonds, and high-rated non-convertible debentures.
The primary goal of a long duration mutual fund is to invest in secure debt instruments with a more extended maturity period to protect the invested capital from interest rate fluctuations and business cycles. Moreover, these funds perform well when interest rates are expected to decline or remain low, as bond prices rise with a decline in interest rates. This allows long duration funds to strike a balance between stability and returns in the long run.
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| Fund Name | Category | Risk | NAV | Expense Ratio | 1Y Returns | 3Y Returns | 5Y Returns | 7Y Returns | 10Y Returns | Rating | Fund Size (in Cr) | Exit Load |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
SBI Long Term Fund | Debt | Moderate | 12.70 | 0.32 | 2.8% | 6.2% | -- | -- | -- | 3 | ₹1,304 | - |
Bandhan Long Term Fund | Debt | Moderate | 11.40 | 0.28 | 4.3% | -- | -- | -- | -- | 4 | ₹49 | - |
Nippon India Nivesh Lakshya Long Term Fund | Debt | Moderate | 18.63 | 0.33 | 2.7% | 6.3% | 5.8% | 6.3% | -- | 3 | ₹6,111 | - |
HDFC Long Term Fund | Debt | Moderate | 12.49 | 0.28 | 2.7% | 5.9% | -- | -- | -- | 2 | ₹2,695 | - |
ICICI Prudential Long Term Fund | Debt | Moderate | 100.89 | 0.43 | 3.2% | 6.6% | 5.4% | 5.9% | 6.8% | 4 | ₹832 | - |
Franklin India Long Term Fund | Debt | Moderate | 10.87 | 0.35 | 5.0% | -- | -- | -- | -- | 5 | ₹47 | - |
Aditya Birla Sun Life Long Term Fund | Debt | Moderate | 13.39 | 0.43 | 3.6% | 6.7% | -- | -- | -- | 4 | ₹98 | - |
Axis Long Term Fund | Debt | Moderate | 1,256.94 | 0.33 | 2.7% | 5.8% | -- | -- | -- | 2 | ₹167 | - |
Kotak Long Term Fund | Debt | Moderate | 11.20 | 0.3155 | 2.8% | -- | -- | -- | -- | 2 | ₹57 | - |
Mirae Asset Long Term Fund | Debt | Moderate | 10.48 | 0.2 | 2.3% | -- | -- | -- | -- | 3 | ₹19 | - |
UTI Long Term Fund | Debt | Moderate | 12.25 | 0.09 | 2.3% | 5.5% | -- | -- | -- | 1 | ₹89 | - |
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Before investing in a long term mutual fund, it is important to ascertain if the fund is the ideal investment option for you.
Factors to Consider Before Investing in a Long Term Mutual Fund
Before investing in a mutual fund, it is important to understand your investment goals, investment horizon, and risk appetite. A long term mutual fund is ideal for investors who are looking to park their money for a longer term. Although these funds carry lower risk, their returns are also low. An investor should consider these factors before making an investment decision.
Interest rates often impact debt instruments. These funds tend to perform best when interest rates are declining, as this increases bond prices and offers capital appreciation. Before investing in a long term fund, one should consider the interest rate trajectory in the short and long term.
As an investor, it is vital to evaluate a fund’s historic performance. Comparing how the fund compares to its peers and the benchmark index can help investors pick the ideal fund. It is also advisable to check the fund manager’s track record and history. The fund manager’s decisions impact the fund performance, making it a crucial factor to consider as well.
While making investment decisions in a mutual fund, it is necessary to know the associated costs and expenses. The expense ratio, exit load, and transaction costs are key costs that can impact your overall returns. Comparing the costs of a fund with other similar funds can help investors pick the most cost-effective fund.
A long term mutual fund can be advantageous as it can help investors diversify their portfolio. By adding debt mutual funds like long term funds, investors can spread risk across asset classes, along with receiving the benefits of debt instruments.
Long term mutual funds invest in securities with more extended maturity periods. This helps build a portfolio that is shielded from business cycles, offering investors stability and a fixed income in the form of interest.
A long term mutual fund invests in government securities and corporate debt instruments with a high credit rating. By investing in government-backed securities and those of reputable companies, the fund can lower credit risk and preserve capital.
One of the primary risks of investing in a long term mutual fund is the impact of interest rates. A long term fund performs the best when interest rates are declining or are expected to stay low. A rise in interest rates can lead to a decline in bond prices and affect the fund's overall performance.
A long term mutual fund invests in securities with a longer maturity period. Although these securities offer stability in the long run, they may experience short-term volatility. Interest rate fluctuations can also make the fund’s performance more erratic in the short term.
Long term mutual funds are debt mutual funds and are taxed similarly to other debt funds. Irrespective of the holding period, the gains from debt mutual funds are added to your income and taxed at the applicable income tax rate.
Now let us jump and check about these top 11 mutual fund schemes.
Fund Performance: The SBI Long Term Fund comes under the Debt category of SBI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in SBI Long Term Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹1,304Cr |
| 1Y Returns | 2.8% |
Fund Performance: The Bandhan Long Term Fund comes under the Debt category of Bandhan Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Bandhan Long Term Fund via lump sum is ₹1,000 and via SIP is ₹100.
| Min Investment Amt | ₹1,000 |
|---|---|
| AUM | ₹49Cr |
| 1Y Returns | 4.3% |
Fund Performance: The Nippon India Nivesh Lakshya Long Term Fund has given 6.32% annualized returns in the past three years and 5.75% in the last 5 years. The Nippon India Nivesh Lakshya Long Term Fund comes under the Debt category of Nippon India Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Nippon India Nivesh Lakshya Long Term Fund via lump sum is ₹5,000 and via SIP is ₹100.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹6,111Cr |
| 1Y Returns | 2.7% |
Fund Performance: The HDFC Long Term Fund comes under the Debt category of HDFC Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in HDFC Long Term Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹2,695Cr |
| 1Y Returns | 2.7% |
Fund Performance: The ICICI Prudential Long Term Fund has given 6.6% annualized returns in the past three years and 5.41% in the last 5 years. The ICICI Prudential Long Term Fund comes under the Debt category of ICICI Prudential Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in ICICI Prudential Long Term Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹832Cr |
| 1Y Returns | 3.2% |
Fund Performance: The Franklin India Long Term Fund comes under the Debt category of Franklin Templeton Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Franklin India Long Term Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹47Cr |
| 1Y Returns | 5.0% |
Fund Performance: The Aditya Birla Sun Life Long Term Fund comes under the Debt category of Aditya Birla Sun Life Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Long Term Fund via lump sum is ₹100 and via SIP is ₹500.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹98Cr |
| 1Y Returns | 3.6% |
Fund Performance: The Axis Long Term Fund comes under the Debt category of Axis Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Axis Long Term Fund via lump sum is ₹5,000 and via SIP is ₹1,000.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹167Cr |
| 1Y Returns | 2.7% |
Fund Performance: The Kotak Long Term Fund comes under the Debt category of Kotak Mahindra Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Kotak Long Term Fund via lump sum is ₹100 and via SIP is ₹100.
| Min Investment Amt | ₹100 |
|---|---|
| AUM | ₹57Cr |
| 1Y Returns | 2.8% |
Fund Performance: The Mirae Asset Long Term Fund comes under the Debt category of Mirae Asset Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in Mirae Asset Long Term Fund via lump sum is ₹5,000 and via SIP is ₹99.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹19Cr |
| 1Y Returns | 2.3% |
Fund Performance: The UTI Long Term Fund comes under the Debt category of UTI Mutual Funds.
Minimum Investment Amount: The minimum amount required to invest in UTI Long Term Fund via lump sum is ₹5,000 and via SIP is ₹500.
| Min Investment Amt | ₹5,000 |
|---|---|
| AUM | ₹89Cr |
| 1Y Returns | 2.3% |
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