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Best Low Duration Mutual Funds

Low-duration mutual funds are a sub-type of debt mutual funds that invest in short-term debt and money market securities. The Macaulay duration of these securities usually ranges from 6 to 12 months, thereby facilitating better liquidity than short, medium, and long duration funds. The main objective of the best low duration mutual funds is to provide steady returns within a short period.

Here, a point to note is that low duration funds garner returns through the interest payments and capital gains earned on debt securities. These funds boost their earnings by allocating a portion of their investments in bonds with a credit rating of AA or lower. Lower-rated bonds provide higher returns but carry a significant risk as well.

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List of Low Duration Mutual Funds in India

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
UTI Treasury Advantage FundDebtLow to Moderate6.2%5₹2,856
Aditya Birla Sun Life Low Duration FundDebtModerate4.3%5₹12,456
JM Low Duration FundDebtLow to Moderate3.8%4₹138
Kotak Low Duration FundDebtModerate3.7%4₹6,960
Nippon India Low Duration FundDebtLow to Moderate4.0%4₹7,771
Axis Treasury Advantage Direct FundDebtLow to Moderate3.9%4₹5,440
Mahindra Manulife Low Duration FundDebtModerate3.6%4₹392
HDFC Low Duration FundDebtModerate3.9%3₹16,075
Baroda BNP Paribas Low Duration FundDebtModerate3.7%3₹225
Sundaram Low Duration FundDebtLow to Moderate12.6%3₹550
LIC MF Savings FundDebtLow to Moderate3.6%3₹1,011
L&T Low Duration FundDebtLow to Moderate3.8%3₹785
Tata Treasury Advantage FundDebtLow to Moderate3.6%3₹2,440
Invesco India Treasury Advantage FundDebtLow to Moderate3.5%3₹1,812
SBI Magnum Low Duration FundDebtModerate3.6%3₹8,938
View All

Features of Low Duration Mutual Fund

Here are some notable features of the best low duration mutual fund –

Asset allocation: The asset allocation of low duration mutual funds varies as per the choice of scheme. However, being a sub-type of debt MF, the focus of investment here is in the money market and debt instruments with a maturity period between 6 and 12 months. Funds need to invest at least 65% of their corpus in these securities.

Risk reward ratio: Being a part of debt funds, low duration mutual funds typically carry a low portfolio risk. Since the aim here is to generate maximum returns within a short period, the focus is on low-rating bonds and other securities that promise higher returns. Therefore, this plan carries a significant risk-reward ratio than other debt funds. However, unlike different types of debt MFs, the best low duration funds involve minimal inflation and interest rate risks. 

Taxability

Investors can earn interests and capital gains from the best low duration mutual funds. The interest earned is not taxable, but the capital gains are.

Short-term Capital Gains Tax: If you hold the units for less than 3 years from the date of purchase, capital gains will come under taxation. It will be according to the income slab you belong to. For instance, if you are under the 15% tax slab, your capital gains will attract a 15% STCG tax.

Long-term Capital Gains Tax: In case you hold on to the units for more than 3 years, you are liable to pay taxes on capital gains. Without indexation benefits, the tax rate is flat 10%, and with this benefit, it is 20%.

TDS: TDS is not applicable on low duration mutual funds.

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Who Are These Funds Suited For?

Low duration mutual funds can match the requirements of individuals with a low to moderate risk appetite. This mutual fund scheme is suitable for an investment horizon of more than 3 months. For a holding period of more than 3 months, it offers higher returns against a slightly more significant risk quotient.

Moving ahead, the best low duration mutual funds 2022 ensures stable yields. Hence, these funds may suit investment objectives pivoted towards mobilising savings for the short term. 

Besides, here are some points to consider before investing in the best low duration mutual funds.

Investment objective: It is vital to be clear about a scheme’s goals, as it will help you choose the ideal plan. You can find a plan that will meet your financial objectives and within the period suited for you.

Risk aptitude: Low duration funds are significantly riskier than other types of debt funds since they invest in low-quality debt instruments. Thus, an interest payment default by any of the underlying companies can lead to sizeable losses. Investors must analyse their risk profile to determine whether they can weather such risks

Previous performance of a fund: Evaluating the past performance of every mutual fund is imperative. Although previous performance does not guarantee any future return, it can be a basis to estimate expected performance in various market situations.

Expense ratio: The expense ratio denotes the aggregated cost of operating a fund. This cost is then deducted from the final return. For instance, if a fund generates an 8% return on a fund with an expense ratio of about 2%, the actual earning will be 6%.

Exit load: AMCs charge a fee if you leave a scheme before a particular period as intended in the related documents. However, the details of this charge vary depending on companies, and some may not levy any such charge.

Experience of the fund manager: Reviewing a fund manager’s experience is key before investing in any fund. It helps gauge whether the fund manager has enough experience to navigate market fluctuations for producing expected returns.

Major Advantages

Here are some major advantages of investing in top low duration mutual funds –

Active risk management: Fund managers actively optimise portfolios as per market conditions to offer optimal returns.

Higher returns: The best low duration mutual funds generate higher returns than few other types of debt funds. They take on greater credit risk and invest in shorter maturity bonds that offer better performance.

Moderate risk: Low duration funds involve moderate risk as they do not hold securities for more than 6 – 12 months. Hence, these funds are notably less vulnerable to inflation risks and interest rate risks. 

Mode of investment: There are two investing methods for low duration mutual funds, lump sum, and SIP. The former is self-explanatory, and the latter is an instalment scheme via which you can deposit funds in regular intervals.

Being a debt fund, the best low duration mutual funds have a lower risk-return ratio than equity funds. However, it may invest in low-rated debt securities to yield higher returns, making it more risk-prone than other types of debt funds.

Let's have a closer look

Now let us jump and check about these top 15 mutual fund schemes.

UTI Treasury Advantage Fund Direct Growth

Fund Performance: The UTI Treasury Advantage Fund has given 7.11% annualized returns in the past three years and 4.74% in the last 5 years. The UTI Treasury Advantage Fund belongs to the Debt category of UTI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in UTI Treasury Advantage Fund via lump sum is ₹10,000 and via SIP is ₹500.

Min Investment Amt₹10,000
AUM₹2,856Cr
1Y Returns6.2%

Aditya Birla Sun Life Low Duration Fund Direct Growth

Fund Performance: The Aditya Birla Sun Life Low Duration Fund has given 6.12% annualized returns in the past three years and 6.96% in the last 5 years. The Aditya Birla Sun Life Low Duration Fund belongs to the Debt category of Aditya Birla Sun Life Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Aditya Birla Sun Life Low Duration Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹12,456Cr
1Y Returns4.3%

JM Low Duration Fund Direct Plan Growth

Fund Performance: The JM Low Duration Fund has given 8.33% annualized returns in the past three years and 5.26% in the last 5 years. The JM Low Duration Fund belongs to the Debt category of JM Financial Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in JM Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹138Cr
1Y Returns3.8%

Kotak Low Duration Fund Direct Growth

Fund Performance: The Kotak Low Duration Fund has given 6.08% annualized returns in the past three years and 6.94% in the last 5 years. The Kotak Low Duration Fund belongs to the Debt category of Kotak Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Kotak Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹6,960Cr
1Y Returns3.7%

Nippon India Low Duration Fund Direct Growth

Fund Performance: The Nippon India Low Duration Fund has given 6.06% annualized returns in the past three years and 6.46% in the last 5 years. The Nippon India Low Duration Fund belongs to the Debt category of Nippon India Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Nippon India Low Duration Fund via lump sum is ₹500 and via SIP is ₹100.

Min Investment Amt₹500
AUM₹7,771Cr
1Y Returns4.0%

Axis Treasury Advantage Direct Fund Growth

Fund Performance: The Axis Treasury Advantage Direct Fund has given 5.59% annualized returns in the past three years and 6.64% in the last 5 years. The Axis Treasury Advantage Direct Fund belongs to the Debt category of Axis Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Axis Treasury Advantage Direct Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹5,440Cr
1Y Returns3.9%

Mahindra Manulife Low Duration Fund Direct Growth

Fund Performance: The Mahindra Manulife Low Duration Fund has given 5.33% annualized returns in the past three years and 6.35% in the last 5 years. The Mahindra Manulife Low Duration Fund belongs to the Debt category of Mahindra Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Mahindra Manulife Low Duration Fund via lump sum is ₹1,000 and via SIP is ₹500.

Min Investment Amt₹1,000
AUM₹392Cr
1Y Returns3.6%

HDFC Low Duration Fund Direct Plan Growth

Fund Performance: The HDFC Low Duration Fund has given 6.01% annualized returns in the past three years and 6.66% in the last 5 years. The HDFC Low Duration Fund belongs to the Debt category of HDFC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in HDFC Low Duration Fund via lump sum is ₹100 and via SIP is ₹100.

Min Investment Amt₹100
AUM₹16,075Cr
1Y Returns3.9%

Baroda BNP Paribas Low Duration Fund Direct Growth

Fund Performance: The Baroda BNP Paribas Low Duration Fund has given 5.77% annualized returns in the past three years and 6.46% in the last 5 years. The Baroda BNP Paribas Low Duration Fund belongs to the Debt category of BNP Paribas Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Baroda BNP Paribas Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹225Cr
1Y Returns3.7%

Sundaram Low Duration Fund Direct Growth

Fund Performance: The Sundaram Low Duration Fund has given 5.57% annualized returns in the past three years and 6.32% in the last 5 years. The Sundaram Low Duration Fund belongs to the Debt category of Sundaram Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Sundaram Low Duration Fund via lump sum is ₹1,000 and via SIP is ₹1,000.

Min Investment Amt₹1,000
AUM₹550Cr
1Y Returns12.6%

LIC MF Savings Fund Direct Growth

Fund Performance: The LIC MF Savings Fund has given 5.54% annualized returns in the past three years and 5.59% in the last 5 years. The LIC MF Savings Fund belongs to the Debt category of LIC Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in LIC MF Savings Fund via lump sum is ₹5,000 and via SIP is ₹1,000.

Min Investment Amt₹5,000
AUM₹1,011Cr
1Y Returns3.6%

L&T Low Duration Fund Direct Growth

Fund Performance: The L&T Low Duration Fund has given 5.53% annualized returns in the past three years and 5.7% in the last 5 years. The L&T Low Duration Fund belongs to the Debt category of L&T Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in L&T Low Duration Fund via lump sum is ₹10,000 and via SIP is ₹1,000.

Min Investment Amt₹10,000
AUM₹785Cr
1Y Returns3.8%

Tata Treasury Advantage Direct Plan Growth

Fund Performance: The Tata Treasury Advantage Fund has given 5.4% annualized returns in the past three years and 5.14% in the last 5 years. The Tata Treasury Advantage Fund belongs to the Debt category of Tata Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Tata Treasury Advantage Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹2,440Cr
1Y Returns3.6%

Invesco India Treasury Advantage Fund Direct Growth

Fund Performance: The Invesco India Treasury Advantage Fund has given 5.34% annualized returns in the past three years and 6.36% in the last 5 years. The Invesco India Treasury Advantage Fund belongs to the Debt category of Invesco Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in Invesco India Treasury Advantage Fund via lump sum is ₹1,000 and via SIP is ₹100.

Min Investment Amt₹1,000
AUM₹1,812Cr
1Y Returns3.5%

SBI Magnum Low Duration Fund Direct Plan Growth

Fund Performance: The SBI Magnum Low Duration Fund has given 5.33% annualized returns in the past three years and 6.3% in the last 5 years. The SBI Magnum Low Duration Fund belongs to the Debt category of SBI Mutual Funds.

Minimum Investment Amount: The minimum amount required to invest in SBI Magnum Low Duration Fund via lump sum is ₹5,000 and via SIP is ₹500.

Min Investment Amt₹5,000
AUM₹8,938Cr
1Y Returns3.6%

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