Medium duration Funds are the conservative type of investment instruments, this type of mutual fund is the debt funds investment option offering the duration of three to four years. When compared with other debt funds, liquid funds, overnight funds, etc., these funds offer higher returns ranging from 7 to 9%. These funds invest in money markets and debt securities for a duration of 3 or 4 years to offer fruitful returns and the end of the tenure.
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When it comes to investment options, there are many ways to invest your money. Based on financial status, risk-bearing capacity, holding period, etc. an investor will choose the investment instruments. Medium Duration Mutual funds when compared with the holding period works as the same as Fixed deposit schemes but offer higher returns than FD.
What are the factors to be considered to invest in Medium Duration Funds?
Risks:
These funds come with 3 types of risks credit risk, interest rate risk, liquidity risk. So before investing into these debt funds, consult the fund manager and consider the objectives that you can handle then go for it.
Expense ratio:
It is the fee that is charged by the investment companies, whenever you go for investing your money look for a low expense ratio, lower the expense ratio higher will be your gains.
Taxation:
If the holding period is less than 36 months, then the short-term capital gain tax is applied. If more than 36 months long term capital tax gain applied say 20%. The dividends received are tax-free (Terms apply).
What are the advantages of Medium duration Funds?