1. Short Term Floater Fund

A short term floater fund invests in floating interest debt securities with a short maturity tenure like government securities.

2. Long Term Floater Fund  

A long term floater fund invests in long term debt securities. However, longer the term, greater the interest rate. Thus, these funds balance their remaining portfolio with fixed interest and money market securities.

1. Short Term Floater Fund

A short term floater fund invests in floating interest debt securities with a short maturity tenure like government securities.

2. Long Term Floater Fund  

A long term floater fund invests in long term debt securities. However, longer the term, greater the interest rate. Thus, these funds balance their remaining portfolio with fixed interest and money market securities.

1. Open-Ended 

Most floater funds are open-ended debt schemes which means that you can buy or sell units of a floater fund at any time. 

2. Diverse Portfolio

Floater funds invest in a broad range of debt instruments that have floating interest rates. The remaining portfolio consists of fixed income securities.

3. Low Risk

Floater funds are considered to be safe because they’re debt funds that invest in debt instruments that carry low risk and volatility. 

1. Impacted By Interest Fluctuations

Fluctuating interest rates affect the performance of debt securities that a floater fund invests in. These fluctuations directly impact the NAV of the floater fund. 

2. Impact Of Repo Rates

In general, the RBI’s repo rate has a huge impact on the debt market. Repo rate determines the interest that must be paid by a commercial bank or any other institution that borrows money from the RBI.

3. Unpredictable Returns

Debt funds like liquid funds and overnight funds generally deliver predictable returns due to the short maturity period and the fixed interest securities that they invest in. 

However, this is not the case with floater funds since they invest in fluctuating interest securities that end up delivering unpredictable returns. 

1. Overnight Funds

Overnight funds are relatively safe debt funds that invest in debt securities with one day maturity. Read all about overnight funds here. 

2. Liquid Funds

Liquid funds are comparatively safe debt funds that invest debt and money market instruments that mature in 60-91 days. Read all about liquid funds here. 

3. Banking & PSU debt Funds

Banking & PSU debt Funds lend to banking and PSU companies. 

4. Money Market Funds

Money market funds invest in cash and cash equivalents.

5. Arbitrage Opportunities Funds

Arbitrage funds use arbitrage opportunities to generate returns. Read all about arbitrage funds here. 

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1. Short Term Capital Gains

You’ll have to pay a Short Term Capital Gains tax if you sell your floater funds within 3 years. The tax rate is calculated according to the investor’s tax slab. 

2. Long Term Capital Gains

If you sell your floater funds after 3 years, you’ll be liable to pay a Long Term Capital Gains tax that’s 20% with indexation benefits. 

Read this blog to know about tax saving mistakes to avoid in 2021