Debt Funds: Are they good enough for stable returns?
Debt Mutual Funds are an increasingly popular choice for investment in India for individuals looking for stable returns. Debt mutual funds are a type of mutual fund that invest in fixed income securities such as bonds, bills, and other debt-related investments. These funds are generally a low-risk investment option, as debt tends to have low returns, but can offer a steady stream of income for investors.
Before deciding on a debt mutual fund, it is important for investors to understand the best mutual fund scheme that is available. The most common types of debt mutual funds include government securities, corporate bonds, municipal bonds, and money market funds. Each type of fund has its own risk/return profile and should be researched thoroughly before investing.
Government Securities (Gilt):
For investors looking for low-risk/low-return investments with stability, this is the best mutual funds scheme to invest. These funds invest in bonds backed by the Indian Government for full faith and credit. These funds are considered to be the least risky when compared to other types of debt mutual funds and usually have lower returns.
| 3 Best Gilt Mutual Fund Schemes: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
ICICI Pru Gilt Fund (G) |
2,354.19 |
1.14% |
2.57% |
6.26% |
6.04% |
|
Kotak Gilt – Invest Plan (G)
|
1,684.09
|
1.45%
|
1.18%
|
5.03%
|
5.60%
|
|
SBI Magnum Gilt Fund – (G)
|
3,569.74
|
0.94%
|
2.51%
|
5.86%
|
6.27%
|
| 3 Best Gilt Mutual Fund Schemes with 10 years constant duration: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
ICICI Pru Constant Maturity Gilt Fund-Reg (G)
|
511.06
|
1.14%
|
0.39%
|
5.72%
|
7.06%
|
|
SBI Magnum Constant Maturity Fund (G)
|
1,148.10
|
0.64%
|
0.64%
|
4.84%
|
7.05%
|
|
IDFC GSF Constant Maturity Plan (G)
|
222.96
|
-0.40%
|
5.18%
|
5.18%
|
7.80%
|
Corporate Bonds:
For investors who are looking for a higher potential return and are willing to accept more risk, corporate bonds are good mutual funds to invest. These funds invest in debt issued by corporations, which can be riskier than government securities as there is a higher risk associated with the performance of the company issuing the bond. However, these funds have the potential for higher returns than government securities.
| 3 Best Corporate Bond Mutual Fund Schemes: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
HDFC Corporate Bond Fund (G)
|
21,721.50
|
0.61%
|
2.36%
|
6.51%
|
6.86%
|
|
Aditya Birla SL Corporate Bond Fund (G)
|
13,291.81
|
0.46%
|
3.02%
|
6.88%
|
7.10%
|
|
Kotak Corporate Bond Fund-Regular (G)
|
8,722.75
|
0.65%
|
2.93%
|
6.12%
|
6.74%
|
Other Debt Mutual Funds You Can Consider:
For a slightly higher risk, one can even consider below debt funds for stable returns:
| 3 Best Banking & PSU Debt Mutual Fund Schemes: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
Aditya Birla SL Banking & PSU Debt Fund – (G)
|
10,205.75
|
0.69%
|
2.63%
|
6.39%
|
6.71%
|
|
AXIS Banking & PSU Debt Fund (G)
|
14,218.23
|
0.62%
|
2.99%
|
6.27%
|
7.02%
|
|
IDFC Banking & PSU Debt Fund (G)
|
16,186.63
|
0.62%
|
2.63%
|
6.63%
|
7.09%
|
| 3 Best Credit Risk Debt Mutual Fund Schemes: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
HDFC Credit Risk Debt Fund (G)
|
8,627.03
|
1.57%
|
3.51%
|
7.55%
|
6.88%
|
|
ICICI Pru Credit Risk Fund (G)
|
7,927.86
|
1.54%
|
4.76%
|
7.64%
|
7.26%
|
|
SBI Credit Risk Fund (G)
|
2,977.52
|
1.55%
|
3.63%
|
6.52%
|
6.13%
|
| 3 Best Dynamic Bond Mutual Fund Schemes: | |||||
|---|---|---|---|---|---|
|
Scheme Name |
AUM |
TER |
1 Year Return % |
3 Years Return % |
5 Years Return % |
|
ICICI Pru All Seasons Bond Fund – Regular (G)
|
5,646.11
|
1.37%
|
3.11%
|
6.94%
|
6.55%
|
|
Kotak Dynamic Bond Fund – Regular (G)
|
2,050.32
|
1.21%
|
2.15%
|
5.83%
|
6.71%
|
|
AXIS Dynamic Bond Fund (G)
|
1,691.03
|
0.66%
|
1.42%
|
6.16%
|
6.26%
|
Conclusion:
Choosing the right type of debt mutual fund depends on each investor’s investment goals and risk tolerance. Government securities and municipal bonds are typically the least risky and offer lower returns, while corporate bonds and money market funds offer higher potential returns at a higher level of risk.
Ultimately, research is the best way for investors to ensure they are investing in the debt mutual fund that is best for them. Investors should research each type of fund, compare risk/return profiles, and consult a financial advisor to determine which type of fund is the best mutual fund scheme option for their situation.
