Why Medium Duration Funds Are Worth Considering for Your Investments

Many experts say that medium duration funds can bring better earnings when interest rates drop. If you’re curious about this, keep reading to find out about medium duration funds.

Most people who invest in mutual funds usually choose safe options like liquid funds, ultra-short term funds, and banking funds. They might know about gilt funds but not many are familiar with medium duration funds. This year, you’re likely to hear a lot about medium duration funds, as many advisors are encouraging their clients to invest in them.

What Are Medium Duration Funds?

According to SEBI rules, medium duration funds must invest in debt and money market tools that stay around three to four years in duration. This means these funds are good for investors planning to invest for that time or longer. However, it’s important to look at the fund’s portfolio duration to ensure it matches your goals.

Not Everyone’s Favorite

Many advisors steer regular investors away from medium to long-term debt funds. These funds can be very affected by interest rate changes; they go down in value when rates go up. Some cautious investors might find it tough to handle the ups and downs that come with these funds.

In simple terms, if you want to set aside money for four years or more and are ready for some risk, medium duration funds could be a good option for you.

Keep an Eye on Your Investments

Be sure to check your funds regularly. For example, the Bandhan Bond Fund Medium Term Plan has struggled lately, being in the lowest-performing group for the past 20 months. The HDFC Medium Term Debt Fund has been in the middle group for the last 17 months.

Top Medium Duration Funds to Consider in March 2025:

– SBI Magnum Medium Duration Fund
– HDFC Medium Term Debt Fund
– Bandhan Bond Fund – Medium Term Plan
– Axis Strategic Bond Fund

How We Chose These Funds:

NiftyStat used a few key points to pick these funds:

1. Average Rolling Returns: We looked at daily returns over the last three years to see how well they performed.

2. Consistency: We checked how steady the returns were over three years using a method called the Hurst Exponent. Funds with a higher “H” tend to be more stable.

3. Downside Risk: We calculated how often the fund had negative returns, which helps show how risky it is.

4. Outperformance: We compared the fund’s returns against a benchmark to see how well it did.

5. Asset Size: For debt funds, the minimum amount we considered is Rs 50 crore (Important notice: past performance does not guarantee future results).