For investors looking for stable returns and lower risk, medium duration mutual funds present an attractive option. Debt funds are categorized based on their investment horizon and risk levels, making it easier for investors to choose the right fund. Among these, medium duration mutual funds are gaining popularity due to their balance between returns and risk.
Let’s take a detailed look at what medium duration mutual funds are, their benefits, and the top-performing funds in 2025.
What Are Medium Duration Mutual Funds?
Medium duration mutual funds primarily invest in debt securities and money market instruments with a typical investment horizon of three to four years. The investment duration is determined by the Macaulay Duration, which measures the time required to recover the cost of investment.
These funds offer returns in the range of 7% to 9%, making them suitable for investors seeking a stable and safer investment avenue. Compared to short-term debt funds, medium duration funds have lower volatility while also providing better liquidity than long-term investments like real estate or gold.
Top Medium Duration Mutual Funds in 2025
Here’s a look at the best-performing medium duration mutual funds in 2025, based on returns, risk rating, and investment portfolio.
1. Aditya Birla Sun Life Medium Term Plan Direct Growth
- Net Asset Value (NAV): ₹41.65
- 3-Year Annualized Return: 14.2%
- Assets Under Management (AUM): ₹2,000+ crore
- Risk Category: Moderately High
- Portfolio Breakdown:
- 38% in Government of India (GOI) Securities
- Remaining in debentures, bonds, and Non-Convertible Debentures (NCDs)
- Minimum SIP Investment: ₹1,000
2. Axis Strategic Bond Fund Direct Growth
- NAV: ₹29.62
- 3-Year Annualized Return: 7.46%
- AUM: ₹1,980 crore
- Risk Category: Moderately High
- Portfolio Breakdown:
- 39% in GOI Securities
- Minimum SIP Investment: ₹100
3. ICICI Prudential Medium Term Bond Fund Direct Plan Growth
- NAV: ₹47.40
- 3-Year Annualized Return: 7.32%
- AUM: ₹5,695 crore
- Risk Category: Moderately High
- Portfolio Breakdown:
- 27% in GOI Securities
- Rest invested in debt instruments from financial, construction, and energy sectors
- Minimum SIP Investment: ₹1,000
4. Kotak Medium Term Fund Direct Growth
- NAV: ₹24.32
- 3-Year Annualized Return: 7.21%
- AUM: ₹1,879 crore
- Risk Category: Moderately High
- Portfolio Breakdown:
- 26% in GOI Securities
- The rest is diversified across construction, energy, financial, metals & mining, services, and consumer staples sectors
- Minimum SIP Investment: ₹100
5. SBI Magnum Medium Duration Fund Direct Growth
- NAV: ₹53.41
- 3-Year Annualized Return: 7.01%
- AUM: ₹6,552 crore
- Risk Category: Moderately High
- Portfolio Breakdown:
- 34% in GOI Securities
- The remaining investment is spread across construction, financial, and consumer staples sectors
- Minimum SIP Investment: ₹500
Why Choose Medium Duration Mutual Funds?
1. Balanced Risk & Return – Offers higher returns than short-term debt funds while avoiding the high volatility of equity investments.
2. Ideal for 3-4 Year Investment Horizon – Perfect for investors not looking for long-term commitments but still want steady growth.
3. Government Securities Exposure – A significant portion of investments are in GOI securities, ensuring stability and security.
4. Low Minimum Investment – Investors can start with SIPs as low as ₹100, making it accessible to all.
Final Thoughts
Medium duration mutual funds are a great choice for conservative investors seeking stable returns with moderate risk. The funds listed above have proven track records and diversified portfolios, making them reliable options for 2025. However, it’s always advisable to review risk factors, fund objectives, and personal financial goals before investing.
Would you consider investing in medium duration mutual funds this year? Let us know your thoughts!