Short-term debt funds are categorized based on the investment horizon. For investments of a few days or weeks, liquid and overnight funds are appropriate. For a horizon of six months to a year, money market, ultra short duration, and low duration funds are suitable. Short duration funds are recommended for a horizon of two to three-and-a-half years. The yield or return expectation for these funds ranges from 6.8% to 7.2%. There is an inverse relationship between interest rates and returns.
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