Debt funds now offer a more attractive, tax-efficient option for low-risk investors seeking better returns than FDs. In the current environment, short-duration funds and medium-duration funds are ideal for those with investment horizons of 1–3 years and 3–5 years, respectively. Dynamic bond funds are also suitable for those who want fund managers to actively manage duration based on changing interest rates. For risk-averse investors, gilt funds can be a good alternative, offering safety with potential for capital gains if interest rates decline further, Adhil Shetty, CEO of Bankbazaar.com shared with ETMutualFunds.