Medium-term funds are equity funds that lend for 3 or more years to quality companies. The longer period of loans means that these returns on assets are subject to the fluctuations in interest rates that lenders experience over time due to positive or negative economic cycles. Appropriate if the interest rates in the economy are expected to remain stable OR move down Can be a worthy replacement for medium to long-term Fixed Deposits (i.e., for an investment horizon of at least 3 years) Are also more tax-efficient than Bank Fixed Deposits if the investment duration is 3 years or more as these funds qualify for indexing gain. According to the Sebi categorization, medium-term schemes must invest between three and four years in debt and money market instruments with Macaulay's portfolio length. At a time when the Reserve Bank of India (RBI) is expected to hike policy rates, these schemes may not look promising. In fact, that's why these days no one is talking about them. However, investors can consider investing in them with a long investment horizon. Nonetheless, investors should be willing in the interim period to go through the pain of rising interest rates.