Duration
A measure, in years, of how much a bond or debt fund's price moves when interest rates change.
Duration measures how much a bond’s price, or a debt fund’s NAV, reacts to a change in interest rates. It’s stated in years. A fund with a duration under a year barely moves when rates change; one with a duration of seven years can move a lot. SEBI uses Macaulay duration to define debt fund categories. See debt funds explained.
Questions people ask
What does duration mean in a debt fund?
Duration tells you how sensitive the fund's bonds are to interest rates, in years. A rough rule: for every 1 percentage point rise in rates, the fund's NAV falls by about its duration in percent, and rises by about as much when rates fall.
Is a higher duration bad?
Not bad, just more sensitive. A long-duration fund gains more when rates fall and loses more when they rise. For money you need soon, a short duration keeps the swings small. SEBI defines several debt fund categories by their Macaulay duration.
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