Floater Funds are a type of debt mutual fund that invests primarily in floating-rate debt instruments, whose interest payouts adjust with market benchmarks like RBI repo rates or T-bill yields. This makes them less sensitive to rising interest rates compared to traditional fixed-rate debt funds, offering investors a smart way to protect capital while earning market-linked returns.

The underlying securities in a floater fund reset their interest periodically, so when rates rise, returns may improve automatically. Fund managers actively select and manage these instruments to balance risk, yield, and liquidity, making them suitable for both short- and medium-term goals.

1. Invest mainly in floating-rate bonds and debt instruments
2. Lower duration and interest rate risk than fixed-rate debt funds
3. Actively managed by professional fund managers
4. Provides portfolio diversification and stability
5. Open-ended structure allows easy entry and exit

Floater funds are ideal when interest rates are expected to rise or remain volatile. They help investors mitigate interest rate risk while earning steady returns, making them a preferred choice in uncertain rate environments.

1. Reduced sensitivity to interest rate hikes
2. Potential for higher returns when rates rise
3. Lower volatility than long-duration debt funds
4. Adds stability and diversification to an investment portfolio
5. Professionally managed to balance yield and risk

Returns may underperform during falling rate cycles

Some credit risk remains depending on issuers

Limited capital appreciation compared to long-duration fixed-rate funds

Best suited for conservative to moderate investors seeking capital protection with flexibility and market-linked returns during rising or volatile interest rate cycles.

STCG:Gains from investments held less than 36 months are taxed at your income tax slab rate

LTCG:Gains from investments held more than 36 months are taxed at 20% with indexation

Dividend income:Taxed at your applicable slab rate