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What is duration risk in debt funds and how does it affect your NAV? 4 things investors should know
Mint 50 min ago·21 Sept 2026, 9:05 am
Duration risk is the sensitivity of a debt fund’s net asset value (NAV) to changes in interest rates. When bond yields move, the price of the underlying securities shifts, and funds that hold longer‑duration bonds see larger NAV swings than those with shorter‑duration holdings.
For investors, this matters because a rise in rates can erode the value of a fund’s assets, potentially reducing returns, especially if the fund’s average maturity is far out. Modified duration, together with factors like credit quality and yield‑to‑maturity, helps gauge how much a fund might be affected by rate movements relative to an investor’s time horizon.
Going forward, keep an eye on the central bank’s policy stance and broader rate expectations, as well as the fund’s stated duration profile. Aligning the fund’s duration with your own investment horizon and monitoring credit risk can help manage the impact of interest‑rate volatility.
Excerpt from Mint
Debt fund NAVs can fluctuate when bond yields change, with longer-duration portfolios generally more sensitive to interest-rate movements. Investors should assess modified duration along with maturity, credit quality, yield-to-maturity and their investment horizon. Debt mutual funds may appear less volatile than…Read the original at Mint
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