Top Medium Duration Funds to Invest Online in 2024
Debt presents various options for conservative investors. SEBI has classified debt funds into 16 categories, simplifying the selection process for investors. Investment duration significantly impacts returns in debt funds. For optimal results, investors must align their investment horizon with the maturity of the debt fund. Let’s delve into what medium-duration debt funds offer. Medium-duration funds, lending to reputable companies for 3 or more years, expose investors to fluctuations in interest rates influenced by economic cycles.
Top 10 Medium Duration Funds to Invest in 2024
Here are the top 10 medium duration funds sorted according to their 5Y CAGR:
| Fund Name | AUM (in Cr) | Expense Ratio (%) | 1Y Returns | 5Y CAGR |
|---|---|---|---|---|
| Aditya Birla SL Medium Term Plan | 1,858.58 | 0.85 | 7.17% | 9.33% |
| SBI Magnum Medium Duration Fund | 6,222.05 | 0.69 | 7.35% | 8.00% |
| ICICI Pru Medium Term Bond Fund | 6,408.55 | 0.74 | 7.40% | 7.96% |
| HDFC Medium Term Debt Fund | 4,188.28 | 0.59 | 7.38% | 7.49% |
| Axis Strategic Bond Fund | 1,985.48 | 0.33 | 7.82% | 7.48% |
| HSBC Medium Duration Fund | 801.50 | 0.40 | 7.53% | 7.27% |
| Kotak Medium Term Fund | 1,743.87 | 0.66 | 8.18% | 7.04% |
| Franklin India Income Opportunities Fund | 0.05 | - | 15.80% | 6.76% |
| Bandhan Bond Fund - Medium Term Plan | 1,581.38 | 0.77 | 6.33% | 6.62% |
| DSP Bond Fund | 357.79 | 0.40 | 7.11% | 5.55% |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data on the list is from 10th May, 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
Overview of the Medium Duration Funds in India 2024
Aditya Birla SL Medium Term Plan
Aditya Birla Sun Life Medium Term Plan Direct-Growth, a Debt mutual fund by Aditya Birla Sun Life Mutual Fund, managed by Mohit Sharma and Sunaina da Cunha, has an AUM of ₹1,858.58 Crores. Its latest NAV is ₹37.239 as of May 10, 2024, at 12:45 pm. Over the last year, it yielded a return of 7.23%, while in the last 3 years, it performed at 44.72%, and since its launch, it has shown a return of 176.66%. The minimum SIP investment for this scheme is ₹1000. It is one of the best medium duration debt funds on our list.
SBI Magnum Medium Duration Fund
SBI Magnum Medium Duration Fund, a debt mutual fund by SBI Mutual Fund, has been managed by Lokesh Mallya and Mohit Jain since its launch. With an AUM of ₹6,222.05 Crores, its latest NAV stands at ₹49.919 (as of May 10, 2024, 12:46 pm). Over the last year, it yielded returns of 7.19%, 19.26% over the last three years, and 163.53% since inception. The minimum SIP investment for this scheme is ₹500.
ICICI Pru Medium Term Bond Fund
ICICI Prudential Medium Term Bond Fund, a Debt mutual fund by ICICI Prudential Mutual Fund, commenced on an undisclosed date. It is presently overseen by fund managers Manish Banthia and Akhil Kakkar. With assets under management (AUM) amounting to ₹6,321.81 Crores, its latest NAV stands at ₹44.220 as of 10 May 2024, 12:47 pm. Over the past year, the scheme has yielded returns of 7.30%, while over the last three years, it has shown growth of 20.55%. Since its inception, the scheme has provided a remarkable return of 149.94%. The minimum SIP amount required for investment in this scheme is ₹1000.
HDFC Medium Term Debt Fund
HDFC Medium Term Debt Fund, a debt mutual fund by HDFC Mutual Fund, managed by Shobhit Mehrotra, holds an AUM of ₹4,188.28 Crores. As of May 10, 2024, at 12:47 pm, the latest NAV stands at ₹55.077. Over the past year, the scheme yielded a return of 7.19%, while over the last three years, it performed at 19.14%. Since its inception, it has shown a growth of 142.86%. The minimum SIP amount required for investment in this scheme is ₹100.
Axis Strategic Bond Fund
Axis Strategic Bond Fund, a Debt mutual fund by Axis Mutual Fund, commenced on an undisclosed date. It is currently overseen by fund managers Sachin Jain and Akhil Bipin Thakker. With an AUM of ₹1,970.65 Crores, its latest NAV stands at ₹27.597 as of May 10, 2024, at 12:48 pm. Over the past year, the scheme has yielded returns of 7.64%, 21.02% over the last three years, and an impressive 153.98% since its inception. The minimum SIP investment required is ₹100.
HSBC Medium Duration Fund
HSBC Medium Duration Fund, a Debt mutual fund by HSBC Mutual Fund, has an AUM of ₹801.50 Crores. Managed by Shriram Ramanathan and Kapil Punjabi, it was launched on an unspecified date. As of 10th May 2024 at 12:49 pm, the latest NAV stands at ₹20.048. Over the last year, the scheme has yielded a return of 7.46%, while over the past 3 years, it stands at 19.00%. Since its inception, the return has been 100.48%. The minimum SIP investment amount is ₹1000.
Kotak Medium Term Fund
Kotak Medium Term Fund Direct-Growth, a Debt mutual fund by Kotak Mahindra Mutual Fund, managed by Deepak Agrawal and Sunit Garg, launched on an unspecified date. It holds an AUM of ₹1,743.87 Crores, with the latest NAV at ₹22.566 as of May 10, 2024, at 12:52 pm. Over the past year, the scheme has yielded returns of 8.04%, 20.71% over the last three years, and 125.66% since inception. The minimum SIP investment amount is ₹100.
Franklin India Income Opportunities Fund
Franklin Templeton Mutual Fund offers the Franklin India Opportunities Direct Fund-Growth, a thematic mutual fund scheme operational since January 1, 2013, totalling 11 years and 4 months. As of March 31, 2024, the fund holds assets worth ₹2,950 Crores. It stands as a medium-sized fund within its category. Notably, its expense ratio of 0.37% is lower than the average for similar thematic funds, enhancing its appeal to investors.
Bandhan Bond Fund – Medium Term Plan
Bandhan Bond Fund Medium Term Plan Direct-Growth, a Debt mutual fund from Bandhan Mutual Fund, is managed by Suyash Choudhary. With an AUM of ₹1,581.38 Crores, its latest NAV stands at ₹44.994 as of May 10, 2024, at 12:58 pm. Over the last year, the scheme has yielded returns of 6.35%, while over the last 3 years, it has returned 15.06%. Since its launch, it has returned 128.61%. The minimum SIP investment for this scheme is ₹100.
DSP Bond Fund
DSP Bond Direct-Growth, a Debt mutual fund scheme by DSP Mutual Fund, is managed by Vivekanand Ramakrishnan and Karan Mundhra. With an AUM of ₹357.79 Crores, its latest NAV stands at ₹78.387 as of May 10, 2024, at 1:01 pm. Over the last year, the scheme has yielded a return of 6.90%, 16.88% over the last 3 years, and 113.56% since its launch. The minimum SIP investment for this scheme is ₹100.
How do Medium Duration Funds Work?
Medium duration funds invest in debt instruments with maturities typically three to four years. This strategic duration helps manage interest rate risk, as medium-term securities are less affected by interest rate fluctuations than longer-term bonds.
These funds aim to optimise returns by selecting a mix of government and corporate debt securities managed actively by portfolio managers. Holdings are adjusted based on market conditions and interest rate forecasts to maximise returns and minimise risk.
Features of Medium Duration Funds
Medium duration debt funds offer a balanced investment option with specific characteristics:
- Maturity Duration: Typically ranging from 3 to 4 years, providing a balanced risk-return profile between short and long-term investments.
- Enhanced Liquidity: Compared to long-term funds, these offer greater liquidity, allowing investors quicker access to their cash when needed.
- Risk Diversification: These funds spread risk by investing in various debt instruments, minimising the impact of individual defaults or market fluctuations.
- Tax Efficiency: Capital gains from holding medium duration debt funds for over three years are taxed at a lower rate, making them advantageous for long-term investors.
Factors to Consider While Investing in Medium Duration Funds
Medium Duration Mutual Funds play a pivotal role in investors’ portfolios by offering a balanced approach to financial goals. They aim to generate income through interest and dividend payouts, appealing to those seeking cash flow. Additionally, these funds target moderate capital appreciation, providing growth potential without the aggressiveness of long-term options.
- Income Generation: Medium duration funds deliver a reliable source of income to investors through interest and dividend payouts.
- Moderate Capital Appreciation: Unlike long-term funds, medium duration funds offer a balanced potential for capital growth.
- Lower Interest Rate Risk: These funds are designed to have lower sensitivity to interest rate fluctuations, providing stability in volatile market conditions.
- Portfolio Diversification: They play a crucial role in diversifying portfolios by spreading risk across various fixed-income instruments, enhancing overall stability.
- Balanced Risk-Reward Profile: Medium to long duration funds aim to strike a harmonious balance between risk and reward, offering investors moderate risk with growth potential.
Who Should Invest in Medium Duration Funds?
These funds carry inherent risks, including interest and credit risks common to all mutual funds. However, they typically entail a moderate level of risk, appealing to investors comfortable with medium-risk exposure.
The funds are suitable for those seeking medium-term investments (3 to 5 years) and offer potential benefits. While returns are not assured, they tend to be less influenced by market fluctuations and offer predictable returns within this timeframe.
How to Choose the Best Mid Duration Funds?
When selecting the best medium duration funds, consider several factors:
- Performance History: Examine the fund’s past performance over various market cycles to gauge its consistency and ability to deliver returns.
- Fund Manager Expertise: Research the fund manager’s experience, investment strategy, and track record in managing medium duration funds.
- Expense Ratio: Look for funds with lower expense ratios, as higher expenses can eat into your returns over time.
- Portfolio Composition: Analyze the fund’s portfolio holdings to ensure they align with your investment goals and risk tolerance.
- Credit Quality: Assess the credit quality of the bonds held in the fund’s portfolio to understand the level of risk involved.
- Duration Risk: Understand the fund’s average duration, as this determines its sensitivity to interest rate changes.
- Liquidity: Consider the liquidity of the fund’s underlying assets. As this can impact its ability to meet redemption requests during market downturns.
How to Invest in Medium Duration Funds?
When investing in medium duration funds, start by researching different fund options available in the market. Assess their historical performance, expense ratios, and investment objectives to ensure they align with your financial goals. Next, consider the fund manager’s track record and expertise in managing medium duration funds. Once you’ve selected a fund, carefully review its investment strategy and portfolio holdings to understand its risk profile and potential returns. Finally, monitor your investment periodically to ensure it continues to meet your investment objectives and make adjustments as necessary.
How do Medium Duration Funds Generate Returns?
Medium duration funds generate returns primarily through investing in a diversified portfolio of fixed income securities such as government bonds, corporate bonds, and money market instruments. These funds aim to capitalise on interest rate movements and credit spreads to generate income for investors. Additionally, fund managers may actively manage the portfolio duration to take advantage of changes in interest rates, aiming to maximise returns while managing risk. The returns generated by medium duration funds are influenced by factors such as prevailing interest rates, the credit quality of the underlying securities, and overall market conditions. By carefully selecting securities and actively managing the portfolio, medium duration funds seek to provide investors with stable returns over the medium term.
Benefits of Investing in Medium Duration Funds
Medium-duration mutual funds balance risk and return by investing in medium-term debt instruments. They offer better returns than short-term funds and maintain lower risk than long-term funds.
Key advantages include:
- Moderate sensitivity to interest rate changes, providing stability in various market conditions.
- Better liquidity than long-term debt funds, suitable for investors with intermediate investment horizons.
- Diversification through investment in various debt instruments enhances portfolio stability.
- Accessibility to individual investors, catering to a broad range of investment strategies.
- Professional management by fund managers to mitigate market changes and interest rate risks.
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Risks of Investing in Medium Duration Funds
Investing in medium duration funds carries several risks including:
- Lower returns compared to equity funds necessitate careful selection of funds with lower costs. This includes expense ratios, exit loads, and fund management expenses, all of which can erode potential returns.
- Despite misconceptions about their safety, mid duration funds are still subject to market fluctuations like any other mutual fund, albeit to a lesser extent.
- Optimal returns are typically realised over a mid-term horizon, so premature selling may result in a decline in the value of your units.
Taxability of Medium Duration Funds
The taxation of debt mutual funds depends on how long the investor holds the fund units. If an investor redeems units within three years, the investor incurs Short Term Capital Gains Tax (STCG) based on their income tax bracket. On the other hand, withdrawing investment, including capital gains, after three years subjects the investor to a 20% Long Term Capital Gains Tax, with the benefit of indexation. Indexation adjusts long-term gains for inflation, lowering the tax burden.
To Wrap It Up…
In conclusion, understanding medium duration funds provides investors with a valuable tool for diversifying their portfolios and managing risk. These funds offer a balance between short-term and long-term investments, making them suitable for investors seeking moderate returns with a relatively lower level of risk. By incorporating medium-duration funds into their investment strategy, investors can potentially enhance their overall portfolio performance while maintaining a stable income stream.
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Frequently Asked Questions (FAQs) on Medium Duration Funds
Medium-duration mutual funds invest in debt securities with maturities ranging from three to four years, aiming to balance risk and return.
A medium-term fund typically invests in a blend of government securities and corporate bonds, each with an approximate three-year maturity.
Medium duration funds can typically have low volatility, low risk, and stable returns.
Medium duration funds focus on bonds and financial instruments maturing in three to seven years, ensuring a consistent income flow through interest and dividends. Additionally, these funds allocate across various fixed-income securities such as government and corporate bonds, diversifying risk and minimising the effect of underperforming assets.
The taxation of debt mutual funds depends on how long the investor holds the fund units. If units are redeemed within three years, the investor incurs Short Term Capital Gains Tax (STCG) based on their income tax bracket. On the other hand, withdrawing investment, including capital gains, after three years subjects the investor to a 20% Long Term Capital Gains Tax, with the benefit of indexation. Indexation adjusts long-term gains for inflation, lowering the tax burden.
