Expert Recommends 4 Debt Funds for 1-3 Year Horizon

If you're planning to invest in debt mutual funds for the next one to three years, keeping things simple may be the best strategy.

Sanjay Kathuria shared insights from a podcast featuring Kirttan Shah, Founder & CEO of Truvanta Wealth.

They discussed the best debt fund categories for investors looking to park money for one to three years.

The key takeaway was that for a 1-3 year horizon, there are four main categories of debt funds worth considering: short duration funds, dynamic bond funds, corporate bond funds, and banking and PSU funds.

Short duration funds invest in debt and money market instruments with a portfolio duration of 1-3 years, limiting interest rate risk.

Dynamic bond funds adjust the portfolio's duration based on the interest rate outlook.

Corporate bond funds must invest at least 80% of their assets in the highest-rated corporate bonds, ensuring safety.

Banking and PSU funds invest in debt instruments issued by banks, PSUs, PFIs, and municipal bonds, which are generally considered financially stronger.

Credit risk funds are different because they are the only category where fund managers can take real credit risk on purpose.