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6 Best Debt Mutual Funds for Lump sum Investments 2021
Debt Mutual Fund schemes in India have grown over the years. As a result, the best performing mutual debt funds in the market keep on changing. There are various rating systems in place to judge a mutual fund scheme, namely CRISIL, Morning Star, ICRA. These systems evaluate a mutual fund in terms of returns, Standard Deviation, credit quality of securities, rate movement guidance by RBI, etc.
Why To Invest Lump Sum in Debt Mutual Funds?
- Better return than prevailing Fixed Deposit (FD) & Recurring deposit (RD) rates across banks
- Returns are linked to debt markets
- Immediate (T+1) redemption online
- Indexation (Debt Taxation benefits) benefits on returns over three years
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Best Lumpsum Debt Mutual Funds FY 21 - 22
Below are the top ranked funds from Debt Categories primarily funds having AUM > 500 Crore & are in Ultra-short, Corporate bond, Credit Risk, Low Duration sub categories && Having maturity of less than 3 years and providing highest yields.
Top 6 Lump sum Debt Mutual Funds
Fund NAV Net Assets (Cr) Min Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2020 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Nippon India Credit Risk Fund Growth ₹24.259
↑ 0.00 ₹1,284 500 2.5 4.7 -5.9 0.6 -5.9 11.69% 1Y 4M 2D 1Y 10M 17D HDFC Credit Risk Debt Fund Growth ₹18.0638
↓ 0.00 ₹6,480 5,000 3.1 5.5 10.9 8.3 10.9 8.55% 2Y 1M 2D 2Y 7M 13D ICICI Prudential Regular Savings Fund Growth ₹23.3973
↓ 0.00 ₹6,685 10,000 2.1 4.3 9.6 8.6 9.8 7.85% 2Y 1M 2D 2Y 9M Axis Credit Risk Fund Growth ₹16.0873
↓ 0.00 ₹570 5,000 1.9 3.9 8 6.1 8.2 7.77% 1Y 6M 2Y 1M 6D Aditya Birla Sun Life Credit Risk Fund Growth ₹15.1039 ₹1,662 1,000 2.1 5.2 9.2 5.9 9.4 7.75% 2Y 1M 10D 2Y 9M 4D Kotak Credit Risk Fund Growth ₹23.1998
↓ 0.00 ₹1,851 5,000 1.3 3.6 6.4 7.2 6.6 7.49% 1Y 9M 22D 2Y 6M 11D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 15 Jan 21
(Erstwhile Reliance Regular Savings Fund - Debt Plan) The primary investment objective of this option is to generate optimal returns consistent with moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly investments shall predominantly be made in Debt & Money Market Instruments. Nippon India Credit Risk Fund is a Debt - Credit Risk fund was launched on 8 Jun 05. It is a fund with Moderate risk and has given a Below is the key information for Nippon India Credit Risk Fund Returns up to 1 year are on (Erstwhile HDFC Corporate Debt Opportunities Fund) To generate regular income and capital appreciation by investing predominantly in corporate debt. HDFC Credit Risk Debt Fund is a Debt - Credit Risk fund was launched on 25 Mar 14. It is a fund with Moderate risk and has given a Below is the key information for HDFC Credit Risk Debt Fund Returns up to 1 year are on The fund’s objective is to provide reasonable returns, by maintaining an optimum balance of safety, liquidity and yield, through investments in a basket of debt and money market instruments with a view to delivering consistent performance. However, there can be no assurance that the investment objective of the Scheme will be realized. ICICI Prudential Regular Savings Fund is a Debt - Credit Risk fund was launched on 3 Dec 10. It is a fund with Moderate risk and has given a Below is the key information for ICICI Prudential Regular Savings Fund Returns up to 1 year are on (Erstwhile Axis Fixed Income Opportunities Fund) To generate stable returns by investing in debt & money market instruments across the yield curve & credit spectrum. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns Axis Credit Risk Fund is a Debt - Credit Risk fund was launched on 15 Jul 14. It is a fund with Moderate risk and has given a Below is the key information for Axis Credit Risk Fund Returns up to 1 year are on (Erstwhile Aditya Birla Sun Life Corporate Bond Fund) The investment objective of the Scheme is to generate returns by predominantly investing in a portfolio of corporate debt securities with short to medium term maturities across the credit spectrum within the investment grade. The Scheme does not guarantee/indicate any returns. There can be no assurance that the schemes’ objectives will be achieved. Aditya Birla Sun Life Credit Risk Fund is a Debt - Credit Risk fund was launched on 17 Apr 15. It is a fund with Moderate risk and has given a Below is the key information for Aditya Birla Sun Life Credit Risk Fund Returns up to 1 year are on (Erstwhile Kotak Income Opportunities Fund) The investment objective of the scheme is to generate income by investing in debt/ and money market securities across the yield curve and credit spectrum. The scheme will also seek to maintain reasonable liquidity within the fund. Kotak Credit Risk Fund is a Debt - Credit Risk fund was launched on 11 May 10. It is a fund with Moderately Low risk and has given a Below is the key information for Kotak Credit Risk Fund Returns up to 1 year are on 1. Nippon India Credit Risk Fund
CAGR/Annualized return of 5.8% since its launch. Ranked 21 in Credit Risk category. Return for 2020 was -5.9% , 2019 was 1.9% and 2018 was 6.1% . Nippon India Credit Risk Fund
Growth Launch Date 8 Jun 05 NAV (15 Jan 21) ₹24.259 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹1,284 on 30 Nov 20 Category Debt - Credit Risk AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.82 Sharpe Ratio -0.82 Information Ratio 0 Alpha Ratio 0 Min Investment 500 Min SIP Investment 100 Exit Load 0-12 Months (1%),12 Months and above(NIL) Yield to Maturity 11.69% Effective Maturity 1 Year 10 Months 17 Days Modified Duration 1 Year 4 Months 2 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹11,001 31 Dec 17 ₹11,774 31 Dec 18 ₹12,489 31 Dec 19 ₹12,731 31 Dec 20 ₹11,981 Returns for Nippon India Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.6% 3 Month 2.5% 6 Month 4.7% 1 Year -5.9% 3 Year 0.6% 5 Year 3.7% 10 Year 15 Year Since launch 5.8% Historical performance (Yearly) on absolute basis
Year Returns 2020 -5.9% 2019 1.9% 2018 6.1% 2017 7% 2016 10% 2015 8.8% 2014 11% 2013 8% 2012 9.6% 2011 8.4% Fund Manager information for Nippon India Credit Risk Fund
Name Since Tenure Sushil Budhia 1 Feb 20 0.92 Yr. Data below for Nippon India Credit Risk Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 14.28% Debt 85.72% Debt Sector Allocation
Sector Value Corporate 78.72% Cash Equivalent 13.48% Securitized 7.8% Credit Quality
Rating Value A 39.75% AA 11.92% AAA 0.92% Below B 0% Top Securities Holdings / Portfolio
Name Holding Value Quantity Vineha Enterprises Private Limited
Debentures | -26% ₹327 Cr 22,500 Sanghi Industries Limited
Debentures | -13% ₹166 Cr 1,660 Mariposa Agri Ventures and Hospitalities Private Limited
Debentures | -10% ₹119 Cr 894 Renew Wind Energy (Rajasthan One) Private Limited
Debentures | -9% ₹110 Cr 1,285 INDIAN RECEIVABLE TRUST 19 FEB - 2019
Unlisted bonds | -7% ₹85 Cr 1,330 INNOVATION TRUST XXX
Unlisted bonds | -6% ₹74 Cr 187 Mariposa Agri Ventures and Hospitalities Private Limited
Debentures | -5% ₹61 Cr 500 Narmada Wind Energy Private Limited
Debentures | -3% ₹36 Cr 429 INNOVATION TRUST XXX
Unlisted bonds | -2% ₹22 Cr 172 Nirma Limited
Debentures | -1% ₹15 Cr 150 2. HDFC Credit Risk Debt Fund
CAGR/Annualized return of 9.1% since its launch. Ranked 9 in Credit Risk category. Return for 2020 was 10.9% , 2019 was 8.6% and 2018 was 5.4% . HDFC Credit Risk Debt Fund
Growth Launch Date 25 Mar 14 NAV (15 Jan 21) ₹18.0638 ↓ 0.00 (-0.01 %) Net Assets (Cr) ₹6,480 on 30 Nov 20 Category Debt - Credit Risk AMC HDFC Asset Management Company Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.64 Sharpe Ratio 1.31 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load 0-12 Months (1%),12-18 Months (0.5%),18 Months and above(NIL) Yield to Maturity 8.55% Effective Maturity 2 Years 7 Months 13 Days Modified Duration 2 Years 1 Month 2 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹11,096 31 Dec 17 ₹11,825 31 Dec 18 ₹12,458 31 Dec 19 ₹13,536 31 Dec 20 ₹15,013 Returns for HDFC Credit Risk Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.7% 3 Month 3.1% 6 Month 5.5% 1 Year 10.9% 3 Year 8.3% 5 Year 8.5% 10 Year 15 Year Since launch 9.1% Historical performance (Yearly) on absolute basis
Year Returns 2020 10.9% 2019 8.6% 2018 5.4% 2017 6.6% 2016 11% 2015 9% 2014 2013 2012 2011 Fund Manager information for HDFC Credit Risk Debt Fund
Name Since Tenure Shobhit Mehrotra 25 Mar 14 6.78 Yr. Anand Laddha 21 Oct 20 0.2 Yr. Data below for HDFC Credit Risk Debt Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 9.44% Debt 90.56% Debt Sector Allocation
Sector Value Corporate 68.97% Government 21.59% Cash Equivalent 9.44% Credit Quality
Rating Value A 11.39% AA 52.84% AAA 32.53% BBB 2.89% Below B 0.35% Top Securities Holdings / Portfolio
Name Holding Value Quantity Pipeline Infrastructure Private Limited
Debentures | -7% ₹461 Cr 4,200 Indinfravit Trust
Unlisted bonds | -5% ₹359 Cr 3,500 Power Finance Corporation Limited
Debentures | -5% ₹314 Cr 2,790 Shriram - City Union Finance Limited
Debentures | -4% ₹279 Cr 28,000 Punjab National Bank
Debentures | -4% ₹275 Cr 2,725 DLF Limited
Debentures | -4% ₹250 Cr 2,500 Vedanta Limited
Debentures | -3% ₹228 Cr 2,327 Tata Motors Limited
Debentures | -3% ₹203 Cr 2,000 Tata Motors Limited
Debentures | -3% ₹194 Cr 1,900 Vedanta Limited
Debentures | -2% ₹149 Cr 1,500 3. ICICI Prudential Regular Savings Fund
CAGR/Annualized return of 8.8% since its launch. Ranked 26 in Credit Risk category. Return for 2020 was 9.8% , 2019 was 9.5% and 2018 was 6.6% . ICICI Prudential Regular Savings Fund
Growth Launch Date 3 Dec 10 NAV (15 Jan 21) ₹23.3973 ↓ 0.00 (0.00 %) Net Assets (Cr) ₹6,685 on 30 Nov 20 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.57 Sharpe Ratio 2.08 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 100 Exit Load 0-1 Years (1%),1 Years and above(NIL) Yield to Maturity 7.85% Effective Maturity 2 Years 9 Months Modified Duration 2 Years 1 Month 2 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹10,954 31 Dec 17 ₹11,696 31 Dec 18 ₹12,474 31 Dec 19 ₹13,656 31 Dec 20 ₹14,992 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.4% 3 Month 2.1% 6 Month 4.3% 1 Year 9.6% 3 Year 8.6% 5 Year 8.4% 10 Year 15 Year Since launch 8.8% Historical performance (Yearly) on absolute basis
Year Returns 2020 9.8% 2019 9.5% 2018 6.6% 2017 6.8% 2016 9.5% 2015 9% 2014 11% 2013 7.5% 2012 9.4% 2011 8.9% Fund Manager information for ICICI Prudential Regular Savings Fund
Name Since Tenure Manish Banthia 7 Nov 16 4.15 Yr. Akhil Kakkar 3 Jun 17 3.58 Yr. Data below for ICICI Prudential Regular Savings Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 11.17% Equity 3.81% Debt 85.03% Debt Sector Allocation
Sector Value Corporate 72.97% Government 11.59% Cash Equivalent 11.17% Securitized 0.47% Credit Quality
Rating Value A 16.74% AA 55.32% AAA 21.95% BBB 2.56% Top Securities Holdings / Portfolio
Name Holding Value Quantity 5.77% GOI 2030
Sovereign Bonds | -4% ₹302 Cr 30,500,000 Prestige Estates Projects Limited
Debentures | -4% ₹249 Cr 2,500 ICICI Bank Limited
Debentures | -3% ₹221 Cr 2,086 Kalpataru Properties (Thane) Private Limited
Debentures | -3% ₹201 Cr 2,000 Aditya Birla Fashion and Retail Limited
Debentures | -3% ₹199 Cr 1,750 MTNL
Debentures | -3% ₹183 Cr 1,800 The Great Eastern Shipping Company Limited
Debentures | -3% ₹180 Cr 1,743 TMF Holdings Limited
Debentures | -3% ₹178 Cr 1,500 Embassy Office Parks REIT (Real Estate)
-, Since 31 Jul 20 | 5426022% ₹167 Cr 4,846,800
↑ 3,320,000 Vedanta Limited
Debentures | -2% ₹164 Cr 1,650 4. Axis Credit Risk Fund
CAGR/Annualized return of 7.6% since its launch. Ranked 4 in Credit Risk category. Return for 2020 was 8.2% , 2019 was 4.4% and 2018 was 5.9% . Axis Credit Risk Fund
Growth Launch Date 15 Jul 14 NAV (15 Jan 21) ₹16.0873 ↓ 0.00 (0.00 %) Net Assets (Cr) ₹570 on 30 Nov 20 Category Debt - Credit Risk AMC Axis Asset Management Company Limited Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 1.78 Sharpe Ratio 1.39 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-12 Months (1%),12 Months and above(NIL) Yield to Maturity 7.77% Effective Maturity 2 Years 1 Month 6 Days Modified Duration 1 Year 6 Months Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹10,979 31 Dec 17 ₹11,685 31 Dec 18 ₹12,373 31 Dec 19 ₹12,912 31 Dec 20 ₹13,972 Returns for Axis Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.5% 3 Month 1.9% 6 Month 3.9% 1 Year 8% 3 Year 6.1% 5 Year 6.9% 10 Year 15 Year Since launch 7.6% Historical performance (Yearly) on absolute basis
Year Returns 2020 8.2% 2019 4.4% 2018 5.9% 2017 6.4% 2016 9.8% 2015 8.7% 2014 2013 2012 2011 Fund Manager information for Axis Credit Risk Fund
Name Since Tenure Devang Shah 15 Jul 14 6.47 Yr. Dhaval Patel 4 Sep 20 0.32 Yr. Data below for Axis Credit Risk Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 6.85% Debt 93.15% Debt Sector Allocation
Sector Value Corporate 87.15% Cash Equivalent 6.85% Securitized 4.98% Government 1.02% Credit Quality
Rating Value A 8.19% AA 64.25% AAA 27.56% Top Securities Holdings / Portfolio
Name Holding Value Quantity Essel Mining & Industries Limited
Debentures | -6% ₹35 Cr 350 Embassy Office Parks Reit
Debentures | -6% ₹32 Cr 270 Bahadur Chand Investments Private Limited
Debentures | -5% ₹30 Cr 300 India Grid Trust
Debentures | -5% ₹26 Cr 250 Nirma Limited
Debentures | -4% ₹24 Cr 250 Narmada Wind Energy Private Limited
Debentures | -4% ₹23 Cr 266 Tata Steel Limited
Debentures | -4% ₹21 Cr 120 Northern Arc Capital Limited
Debentures | -4% ₹20 Cr 200 PVR Limited
Debentures | -3% ₹19 Cr 200 MFL SECURITISATION TRUST LXXIX
Unlisted bonds | -3% ₹19 Cr 576 5. Aditya Birla Sun Life Credit Risk Fund
CAGR/Annualized return of 7.4% since its launch. Return for 2020 was 9.4% , 2019 was 2.1% and 2018 was 6.6% . Aditya Birla Sun Life Credit Risk Fund
Growth Launch Date 17 Apr 15 NAV (15 Jan 21) ₹15.1039 Net Assets (Cr) ₹1,662 on 30 Nov 20 Category Debt - Credit Risk AMC Birla Sun Life Asset Management Co Ltd Rating Risk Moderate Expense Ratio 1.6 Sharpe Ratio 1.03 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 100 Exit Load 0-365 Days (1%),365 Days and above(NIL) Yield to Maturity 7.75% Effective Maturity 2 Years 9 Months 4 Days Modified Duration 2 Years 1 Month 10 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹11,030 31 Dec 17 ₹11,922 31 Dec 18 ₹12,709 31 Dec 19 ₹12,974 31 Dec 20 ₹14,189 Returns for Aditya Birla Sun Life Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.6% 3 Month 2.1% 6 Month 5.2% 1 Year 9.2% 3 Year 5.9% 5 Year 7.2% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2020 9.4% 2019 2.1% 2018 6.6% 2017 8.1% 2016 10.3% 2015 2014 2013 2012 2011 Fund Manager information for Aditya Birla Sun Life Credit Risk Fund
Name Since Tenure Sunaina Cunha 1 Apr 17 3.75 Yr. Mohit Sharma 6 Aug 20 0.4 Yr. Data below for Aditya Birla Sun Life Credit Risk Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 6.93% Equity 0.24% Debt 92.84% Debt Sector Allocation
Sector Value Corporate 75.54% Government 17.3% Cash Equivalent 6.93% Credit Quality
Rating Value A 20.48% AA 42.77% AAA 33.43% BBB 1.52% Below B 1.8% Top Securities Holdings / Portfolio
Name Holding Value Quantity L&T Vadodara Bharuch Tollway Limited
Debentures | -10% ₹171 Cr 170,850 Shriram - City Union Finance Limited
Debentures | -9% ₹141 Cr 1,400 L&T Infrastructure Finance Company Limited
Debentures | -5% ₹89 Cr 850 Indusind Bank Limited
Debentures | -4% ₹65 Cr 700 L&T Infrastructure Finance Company Limited
Debentures | -3% ₹52 Cr 500 Coastal Gujarat Power Limited
Debentures | -3% ₹52 Cr 513 Tata Housing Development Company Limited
Debentures | -2% ₹38 Cr 350 Tata Realty and Infrastructure Limited
Debentures | -2% ₹36 Cr 350 LIC Housing Finance Limited
Debentures | -2% ₹36 Cr 350 REC Limited
Debentures | -2% ₹31 Cr 281 6. Kotak Credit Risk Fund
CAGR/Annualized return of 8.2% since its launch. Ranked 18 in Credit Risk category. Return for 2020 was 6.6% , 2019 was 9% and 2018 was 6.2% . Kotak Credit Risk Fund
Growth Launch Date 11 May 10 NAV (15 Jan 21) ₹23.1998 ↓ 0.00 (-0.02 %) Net Assets (Cr) ₹1,851 on 30 Nov 20 Category Debt - Credit Risk AMC Kotak Mahindra Asset Management Co Ltd Rating ☆☆☆ Risk Moderately Low Expense Ratio 1.52 Sharpe Ratio 0.39 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-1 Years (1%),1 Years and above(NIL) Yield to Maturity 7.49% Effective Maturity 2 Years 6 Months 11 Days Modified Duration 1 Year 9 Months 22 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 15 ₹10,000 31 Dec 16 ₹11,043 31 Dec 17 ₹11,768 31 Dec 18 ₹12,498 31 Dec 19 ₹13,620 31 Dec 20 ₹14,520 Returns for Kotak Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 15 Jan 21 Duration Returns 1 Month 0.6% 3 Month 1.3% 6 Month 3.6% 1 Year 6.4% 3 Year 7.2% 5 Year 7.7% 10 Year 15 Year Since launch 8.2% Historical performance (Yearly) on absolute basis
Year Returns 2020 6.6% 2019 9% 2018 6.2% 2017 6.6% 2016 10.4% 2015 9.1% 2014 11.1% 2013 7.3% 2012 9.8% 2011 8.9% Fund Manager information for Kotak Credit Risk Fund
Name Since Tenure Deepak Agrawal 11 May 10 10.65 Yr. Data below for Kotak Credit Risk Fund as on 30 Nov 20
Asset Allocation
Asset Class Value Cash 15.32% Debt 84.68% Debt Sector Allocation
Sector Value Corporate 43.97% Government 40.71% Cash Equivalent 15.32% Credit Quality
Rating Value A 14.03% AA 46.57% AAA 39.41% Top Securities Holdings / Portfolio
Name Holding Value Quantity Talwandi Sabo Power Limited
Debentures | -10% ₹191 Cr 1,938 Punjab & Sind Bank
Debentures | -7% ₹129 Cr 1,284 Coastal Gujarat Power Limited
Debentures | -6% ₹113 Cr 1,000 Andhra Bank
Debentures | -5% ₹91 Cr 880 L&T Infrastructure Finance Company Limited
Debentures | -5% ₹84 Cr 800 Bahadur Chand Investments Private Limited
Debentures | -4% ₹75 Cr 750 Power Finance Corporation Limited
Debentures | -4% ₹69 Cr 620 Andhra Bank
Debentures | -4% ₹67 Cr 650 U.P. Power Corporation Limited
Debentures | -3% ₹54 Cr 540 7.20% KA SDL 2027
Sovereign Bonds | -3% ₹53 Cr 5,000,000
Smart Tips to Look for in Debt Funds
1. Yield
The yield is a measure of the interest Income generated by the Bonds in the portfolio.
For instance, let's assume that a bond has a Face Value of INR 100 with an 8 percent coupon rate. This means that the investor will earn INR 8 p.a., on each bond that he invests in. As the bonds are traded in the open market, the price will fluctuate each Business Day. The interest rates rise and fall and demand for the bonds moves up and down. And this impacts the price of the bond. Let’s assume interest rates rise to 10 percent. Even then the investor will continue to earn INR 8. So to increase the yield to 10 percent, which is the current market rate of interest, the price of the bond will have to drop to INR 80.
In another instance, lets assume that the interest rates fall to 6 percent. Again, the investor will continue to earn INR 8. This time the price of the bond will have to go up to INR 133.
If we look at these assumptions, there are two aspects to it- the one is that the yield is not fixed, but fluctuates to changes in the interest rate. The second one is the price of the bond moves inversely to interest rates. It moves to maintain a level where it will attract buyers.
2. Yield to Maturity
The yield to maturity(ytm) of a debt mutual fund indicates the running yield of the fund. When comparing debt funds on the Basis of YTM, one should also look at that fact that how is the extra yield being generated. Is this at the cost of as lower portfolio quality? Investing in not so good quality instruments has its own issues. You don't want to end up investing in a Debt fund which has such bonds or securities that may Default later on. So, always look at the portfolio yield and balance it off with the credit quality.
3. Modified Duration
Modified duration provides a fair indication of a bond’s sensitivity to a change in interest rates. The higher the duration, the more volatility the bond exhibits with a change in interest rates
4. Credit Quality of Portfolio
In order to invest in Best Debt Funds, checking the credit quality of the bonds and debt securities is an essential parameter. Bonds are assigned a credit rating by various agencies based on their ability to pay the money back. A bond with AAA rating is considered to be the best credit rating and also implies a safe and secure investment. If one truly wants safety and considers this as the paramount parameter in selecting the best debt fund, then getting into a fund with very high-quality debt instruments (AAA or AA+) may be the desired option.
How to Invest in Debt Lump Sum Online?
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All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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