Debt funds investing in debt and money market instruments, such that the Macaulay Duration of the portfolio is between 6 months and 12 months, are termed low-duration funds. These funds have given 4.35 percent and 4.69 percent returns over last one and three years ended November 2, 2021, as per Value Research Data.

Low duration funds are less exposed to interest rate risk compared to their long-duration counterparts. These funds may work for those who have at least six months' investment horizon. Investors have to check the portfolios as some fund managers may be taking credit risk to enhance returns.