Short Duration Funds
Last Updated on 12 May 2026
3 Year Average Returns
6.54%
Funds on Anand Rathi
205
Short Duration Funds to Invest in 2026
| Fund Name | |||
|---|---|---|---|
| Bank of India Short Term Income (IDCW-M) | 4.78% | 6.89% | 10.04% |
| Bank of India Short Term Income (IDCW-Q) | 4.78% | 6.89% | 10.04% |
| Bank of India Short Term Income (G) | 4.78% | 6.89% | 10.04% |
| Aditya Birla SL Savings Fund - Retail (IDCW-W) | 11.04% | 10.55% | 8.14% |
| Aditya Birla SL Savings Fund - Retail (IDCW-D) | 9.11% | 8.89% | 7.29% |
| UTI-Short Duration Fund (IDCW-H) | 5.02% | 6.88% | 6.90% |
| UTI-Short Duration Fund - Regular (G) | 5.02% | 6.88% | 6.90% |
| UTI-Short Duration Fund - Regular (Flexi) | 5.02% | 6.88% | 6.90% |
| UTI-Short Duration Fund (IDCW-A) | 5.02% | 6.88% | 6.90% |
| UTI-Short Duration Fund - Regular (IDCW-Q) | 5.02% | 6.88% | 6.90% |
| Nippon India Ultra Short Duration Fund (IDCW-D) | 6.07% | 7.01% | 6.86% |
| UTI-Short Duration Fund - Regular (IDCW-M) | 4.47% | 6.69% | 6.79% |
| Nippon India Ultra Short Duration Fund (G) | 6.17% | 6.79% | 6.71% |
| Nippon India Ultra Short Duration Fund (IDCW-M) | 6.15% | 6.78% | 6.71% |
| UTI-Short Duration Fund (IDCW) | 5.02% | 6.69% | 6.66% |
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What are Short Duration Fund?
Short Duration Fund is an open-ended debt mutual fund that invests in money market and debt instruments having a maturity of 1 to 3 years. These funds mainly invest in corporate bonds, government securities, treasury bills, and similar debt instruments that mature within a few years.
People often confuse short duration funds with low duration funds, but they are not the same. Low duration fund has a Macaulay period of 6 to 12 months, while it extends for the short duration funds.
Top Features Of Short Duration Fund
Let us look at some prime features of short duration fund discussed below:
Balanced Risk Profile
Short duration funds carry controlled interest rate risk due to moderate maturity, offering more stability than long-term funds and slightly higher risk than low duration funds.
Better NAV Potential
With a longer investment horizon than ultra-short or low duration funds, fund managers could lock into better yields when interest rates are favorable.
Good Liquidity
Though designed for a 1–3 year horizon, short duration mutual funds allow easy redemption, with some funds charging a small exit load for early withdrawals.
Professionally Managed
The portfolio is actively managed by fund managers who adjust maturity, credit exposure, and reinvestment strategy based on market conditions.
Portfolio Diversification
Short duration debt funds help stabilize the overall portfolio, especially when equity or higher-risk assets dominate investments.
How Does Short Duration Mutual Fund Work?
A short duration mutual fund works by pooling money from multiple investors and investing it into debt instruments with an average portfolio duration of 1 to 3 years, as defined by SEBI.
The short duration fund earns returns mainly from:
- Interest income generated by debt instruments
- Limited capital gains from buying and selling bonds.
Once invested, the fund manager continuously monitors interest rate trends, the credit quality of issuers, and market liquidity. Based on this, they may rebalance the portfolio, reinvest maturities, or slightly change duration to optimize the portfolio's value.
This is why returns are not fixed, but over a reasonable period, short duration debt funds could offer predictable and steady performance.
Who Should Invest In Short Duration Debt Fund?
Depending on the nature, short duration debt funds can be:
- Suitable for investors with a 1–3 year investment horizon
- Ideal if you don't need immediate liquidity but also don't want to lock money for too long
- Works well for moderate risk investors who can handle small return fluctuations
- Offers better yield potential than short-term or low-duration funds
- Not suitable for long-term wealth creation or very high return expectations
- May not be ideal if funds are needed within a few months—lower duration funds could fit better.
How To Invest In Short Duration Fund With Anand Rathi?
Looking to invest in Short Duration Mutual Funds? With Anand Rathi, investing is quick, secure, and 100% digital — backed by experienced fund managers, research-based insights, and complete transparency. Get started in 5 simple steps:
Create Or Log In To Your Account
Visit the Anand Rathi platform or download the AR Invest app to sign up. Already registered? Simply log in to your demat account.
Complete Your KYC
Complete your Know Your Customer (KYC) verification quickly and easily to start investing.
Explore Short Duration Fund Options
Check professionally managed Short Duration Funds with research insights, performance data, and ratings.
Choose And Invest
Pick a fund that matches your investment horizon and risk preferences. Invest via Lumpsum or make a SIP investment in just a few clicks.
Track And Manage Anytime
Monitor your investments and view portfolio performance anytime through an easy-to-use dashboard.
Points To Consider Before Investing In Short Duration Debt Fund
Before investing in a short duration debt fund, it's important to understand a few key aspects.
Check the Credit Profile
Some funds take higher credit exposure for better returns, which increases risk. If safety is a priority, prefer funds with higher-rated instruments.
Consider the Interest Rate Environment
Short duration funds perform well when interest rates are stable or falling. In sharply rising rate cycles, short-term returns may be slightly impacted.
Look At The Expense Ratio
Even small differences can affect returns over time, especially in debt funds.
Understand Exit Load And Holding Period
Early redemption may attract an exit load in some funds, check that as well.
Evaluate The Fund Manager
Check the manager's investment philosophy and track record, especially in managing short duration funds through different interest rate cycles.
Align With Your Investment Horizon
Holding the fund for less than a year may not give optimal results. Hence, evaluate the fund's horizon with yours before investing.
Taxation rules on Short Duration Mutual Fund
The taxation for short duration debt funds differs for the two types of investor categories:
Invested "Before April 1, 2023," but sold after July 23, 2024: LTCG (12.5% - without indexation), STCG (slab rate).
Invested "On or after April 1, 2023": Irrespective of holding period - Taxed at the individual's slab rate under STCG rules.
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