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Planning to invest? Short-duration funds safer option for retail investors

Rising yields at shorter end of curve will benefit these funds as liquidity level tightens

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Investors must avoid choosing debt funds based on past returns, and instead select them based on a forward-looking assessment

Sanjay Kumar Singh New Delhi
The one-year returns of different categories of debt funds are broadly in line with their average duration — longer-duration funds and gilt funds have performed the best, followed by medium-to-long-duration funds, with shorter-duration funds bringing up the rear. However, investors must avoid choosing debt funds based on past returns, and instead select them based on a forward-looking assessment.  

Short-term yields may harden

Between March and December, the Reserve Bank of India (RBI) took several steps to support the economy, like reducing interest rates and providing liquidity support. “As the economy improves — and data seems to point to that —