Low-duration funds offer several key benefits, making them an attractive option for conservative investors or those seeking stability in fixed-income portfolios.

1. Reduced Interest Rate Risk: The primary advantage of low-duration funds is their minimal sensitivity to interest rate changes. Since they invest in bonds with shorter maturities, price fluctuations caused by rate changes are less pronounced, providing stability in volatile markets.

2. Capital Preservation: These funds are designed to maintain capital value, making them suitable for risk-averse investors or those with short-term investment horizons.

3. Steady Income: Low-duration funds generate consistent income through interest payments on their bond holdings. While the yields are generally modest, they are more reliable compared to other volatile investments.

4. Liquidity: These funds often have higher liquidity, allowing investors to access their money relatively quickly if needed.

5. Inflation Mitigation: Although not as effective as inflation-linked securities, low-duration funds can act as a buffer during periods of moderate inflation, especially if the interest rates adjust upwards.

6. Portfolio Diversification: They provide diversification by adding a low-risk, fixed-income component to an investment portfolio, reducing overall volatility.

Low-duration funds are a practical choice for managing interest rate risks while ensuring stable returns and maintaining flexibility in short-term financial planning.