A parent needs Rs 10 lakh a year for four years of college fees starting next year. Compare a ladder of four target maturity funds maturing in years 1 to 4 with a single short duration fund, on rate risk and certainty.

She needs about Rs 33.7 lakh today, and the ladder gives her more certainty. Each target maturity fund matures close to Rs 10 lakh on its fee date whatever rates do in between. The short duration fund keeps a constant 2.5 year duration, so rising rates late in the plan can leave a gap: a 1.5 point rise after year two leaves about Rs 36,499 short in year four.

If you need Rs 10 lakh in one year and money earns 7.2%, you need Rs 10 lakh divided by 1.072 today, about Rs 9.33 lakh. Do the same for each year. The four fee payments are worth about Rs 33.72 lakh today at 7.2%, so that is what goes into the plan. The later payments need less today because they have longer to grow: Rs 7.57 lakh now becomes Rs 10 lakh in four years.

Think of buying four train tickets for four trips. Once bought, a fare rise does not touch you. A bond held to maturity pays its face value on its date, so a rise in rates in the meantime changes its price on the way but not what arrives at the end. Each rung of the ladder is a bond fund built to mature on one date, so the fee due that year is locked in at today's yield, less the fund's small costs. The plan stops depending on where rates go.

At the start, the plan's four payments have an average timing of about 2.41 years, close to the fund's 2.5 years, so the match looks good. But the fund keeps its duration near 2.5 years forever, while the plan's remaining payments get closer every year. After two years only two payments remain, averaging about 1.5 years away, while the fund still carries 2.5 years of rate risk, so a late rise in rates hurts. Suppose rates rise 1.5 points just after the second fee is paid. The remaining Rs 18.03 lakh falls about 3.75% to Rs 17.35 lakh. Higher yields of 8.7% help afterwards, but year three leaves Rs 8.86 lakh, which grows only to Rs 9.64 lakh by year four, about Rs 36,499 short.

For a fixed bill on a known date, the ladder is the better fit, because certainty is what the money is for. The short duration fund is not a bad product; its shortfall in this case is modest, and if rates fell it would end slightly ahead. But Ishita's goal is the fees, not the highest possible return. Three practical checks follow. Target maturity funds may not exist for every year she needs, so a bank deposit or a government bond can fill a gap. Each fund's expense ratio and tracking difference reduce what arrives. And tax on debt fund gains differs from deposits, so compare after-tax amounts using the current rules.