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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 Franklin India Low Duration Fund Growth ₹23.3174
↑ 0.02 ₹980 10,000 2.6 7.4 13.3 5.2 1.6 10.08% 9M 22D 1Y 4M 27D Nippon India Credit Risk Fund Growth ₹24.6821
↑ 0.01 ₹1,132 500 1.8 4.4 8.4 0.6 -5.9 9.83% 1Y 4M 20D 1Y 9M 29D Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹29.8177
↑ 0.03 ₹5,188 10,000 1.8 3.6 8.4 7.3 4 9.39% 2M 23D 1Y 7D HDFC Credit Risk Debt Fund Growth ₹18.2921
↑ 0.01 ₹6,996 5,000 1.3 4.8 10.8 8.2 10.9 7.94% 1Y 11M 13D 2Y 5M 10D ICICI Prudential Regular Savings Fund Growth ₹23.6448
↑ 0.00 ₹7,117 10,000 1 3.3 9.3 8.3 9.8 7.54% 1Y 4M 17D 1Y 10M 6D Aditya Birla Sun Life Credit Risk Fund Growth ₹15.3987
↑ 0.01 ₹1,577 1,000 1.9 4.5 11.3 5.9 9.4 7.38% 1Y 5M 16D 1Y 9M 14D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Apr 21
To provide regular income to investors through investment primarily in debt funds. Franklin India Low Duration Fund is a Debt - Low Duration fund was launched on 26 Jul 10. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Low Duration Fund Returns up to 1 year are on (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 To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments. Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan 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 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 1. Franklin India Low Duration Fund
CAGR/Annualized return of 8.2% since its launch. Ranked 3 in Low Duration category. Return for 2020 was 1.6% , 2019 was 5.2% and 2018 was 8.4% . Franklin India Low Duration Fund
Growth Launch Date 26 Jul 10 NAV (12 Apr 21) ₹23.3174 ↑ 0.02 (0.09 %) Net Assets (Cr) ₹980 on 28 Feb 21 Category Debt - Low Duration AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆ Risk Moderate Expense Ratio 0.88 Sharpe Ratio 1.09 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load 0-3 Months (0.5%),3 Months and above(NIL) Yield to Maturity 10.08% Effective Maturity 1 Year 4 Months 27 Days Modified Duration 9 Months 22 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 16 ₹10,000 31 Mar 17 ₹11,020 31 Mar 18 ₹11,923 31 Mar 19 ₹12,976 31 Mar 20 ₹12,307 31 Mar 21 ₹13,853
Purchase not allowed Returns for Franklin India Low Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 12 Apr 21 Duration Returns 1 Month 1.2% 3 Month 2.6% 6 Month 7.4% 1 Year 13.3% 3 Year 5.2% 5 Year 6.7% 10 Year 15 Year Since launch 8.2% Historical performance (Yearly) on absolute basis
Year Returns 2020 1.6% 2019 5.2% 2018 8.4% 2017 8.3% 2016 9.7% 2015 9.8% 2014 10.1% 2013 9.5% 2012 10.2% 2011 9.9% Fund Manager information for Franklin India Low Duration Fund
Name Since Tenure Santosh Kamath 15 Apr 14 6.97 Yr. Kunal Agrawal 15 Apr 14 6.97 Yr. Data below for Franklin India Low Duration Fund as on 28 Feb 21
Asset Allocation
Asset Class Value Cash 13.85% Debt 86.15% Debt Sector Allocation
Sector Value Corporate 86.15% Cash Equivalent 13.85% Credit Quality
Rating Value A 36.43% AA 59.9% BBB 3.67% Top Securities Holdings / Portfolio
Name Holding Value Quantity JM Financial Asset Reconstruction Company Limited
Debentures | -13% ₹130 Cr 1,283 Talwandi Sabo Power Limited
Debentures | -10% ₹100 Cr 1,000 Edelweiss Commodities Services Limited
Debentures | -10% ₹98 Cr 2,000 The Tata Power Company Limited
Debentures | -8% ₹83 Cr 780 Clix Capital Services Private Limited
Debentures | -7% ₹65 Cr 650 Shriram Transport Finance Company Limited
Debentures | -5% ₹51 Cr 500 JM Financial Credit Solutions Limited
Debentures | -5% ₹49 Cr 500 Sadbhav Infrastructure Project Limited
Debentures | -3% ₹32 Cr 232 Shriram Transport Finance Company Limited
Debentures | -3% ₹32 Cr 250 Visu Leasing and Finance Private Limited
Debentures | -3% ₹30 Cr 300 2. Nippon India Credit Risk Fund
CAGR/Annualized return of 5.9% 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 (12 Apr 21) ₹24.6821 ↑ 0.01 (0.05 %) Net Assets (Cr) ₹1,132 on 28 Feb 21 Category Debt - Credit Risk AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.82 Sharpe Ratio -0.71 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 9.83% Effective Maturity 1 Year 9 Months 29 Days Modified Duration 1 Year 4 Months 20 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 16 ₹10,000 31 Mar 17 ₹10,971 31 Mar 18 ₹11,716 31 Mar 19 ₹12,478 31 Mar 20 ₹11,075 31 Mar 21 ₹11,924 Returns for Nippon India Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 12 Apr 21 Duration Returns 1 Month 0.7% 3 Month 1.8% 6 Month 4.4% 1 Year 8.4% 3 Year 0.6% 5 Year 3.5% 10 Year 15 Year Since launch 5.9% 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 1.16 Yr. Data below for Nippon India Credit Risk Fund as on 28 Feb 21
Asset Allocation
Asset Class Value Cash 44.72% Debt 55.28% Debt Sector Allocation
Sector Value Cash Equivalent 42.12% Corporate 33.8% Government 17.06% Securitized 7.02% Credit Quality
Rating Value A 6.09% AA 13.73% AAA 27.95% Below B 0% Top Securities Holdings / Portfolio
Name Holding Value Quantity Vineha Enterprises Private Limited
Debentures | -29% ₹333 Cr 22,500 Mariposa Agri Ventures and Hospitalities Private Limited
Debentures | -11% ₹121 Cr 894 INNOVATION TRUST XXX
Unlisted bonds | -6% ₹70 Cr 187 7.32% Govt Stock 2024
Sovereign Bonds | -6% ₹69 Cr 6,500,000
↑ 6,500,000 Mariposa Agri Ventures and Hospitalities Private Limited
Debentures | -5% ₹62 Cr 500 Renew Wind Energy (Rajasthan One) Private Limited
Debentures | -5% ₹56 Cr 655 State Bank Of India
Debentures | -5% ₹54 Cr 550
↑ 550 5.15% Govt Stock 2025
Sovereign Bonds | -4% ₹49 Cr 5,000,000
↑ 5,000,000 U.P. Power Corporation Limited
Debentures | -3% ₹31 Cr 305
↑ 305 Power Finance Corporation Limited
Debentures | -2% ₹26 Cr 250
↑ 250 3. Franklin India Ultra Short Bond Fund - Super Institutional Plan
CAGR/Annualized return of 8.5% since its launch. Return for 2020 was 4% , 2019 was 9.6% and 2018 was 8.7% . Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth Launch Date 18 Dec 07 NAV (12 Apr 21) ₹29.8177 ↑ 0.03 (0.09 %) Net Assets (Cr) ₹5,188 on 28 Feb 21 Category Debt - Ultrashort Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆ Risk Moderate Expense Ratio 0.52 Sharpe Ratio 4.62 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 9.39% Effective Maturity 1 Year 7 Days Modified Duration 2 Months 23 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 16 ₹10,000 31 Mar 17 ₹10,953 31 Mar 18 ₹11,833 31 Mar 19 ₹12,923 31 Mar 20 ₹13,532 31 Mar 21 ₹14,624
Purchase not allowed Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 12 Apr 21 Duration Returns 1 Month 0.7% 3 Month 1.8% 6 Month 3.6% 1 Year 8.4% 3 Year 7.3% 5 Year 7.9% 10 Year 15 Year Since launch 8.5% Historical performance (Yearly) on absolute basis
Year Returns 2020 4% 2019 9.6% 2018 8.7% 2017 8.2% 2016 9.7% 2015 9.7% 2014 10% 2013 10% 2012 10.3% 2011 9.4% Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
Name Since Tenure Santosh Kamath 25 Oct 18 2.44 Yr. Pallab Roy 1 Jun 08 12.84 Yr. Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 28 Feb 21
Asset Allocation
Asset Class Value Cash 25.19% Debt 74.81% Debt Sector Allocation
Sector Value Corporate 74.81% Cash Equivalent 25.19% Credit Quality
Rating Value A 40.45% AA 59.5% AAA 0.05% Top Securities Holdings / Portfolio
Name Holding Value Quantity JM Financial Credit Solutions Limited
Debentures | -10% ₹532 Cr 5,400 Indostar Capital Finance Limited
Debentures | -9% ₹441 Cr 4,400 Edelweiss Commodities Services Limited
Debentures | -7% ₹368 Cr 7,500 Edelweiss Commodities Services Limited
Debentures | -7% ₹363 Cr 3,650 Tata Realty and Infrastructure Limited
Debentures | -5% ₹237 Cr 2,000 Clix Capital Services Private Limited
Debentures | -5% ₹234 Cr 2,350 Clix Capital Services Private Limited
Debentures | -4% ₹200 Cr 2,000 PNB Housing Finance Limited
Debentures | -4% ₹192 Cr 1,910 Indostar Capital Finance Limited
Debentures | -3% ₹131 Cr 1,301
↓ -866 Clix Capital Services Private Limited
Debentures | -2% ₹100 Cr 1,000 4. HDFC Credit Risk Debt Fund
CAGR/Annualized return of 8.9% 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 (12 Apr 21) ₹18.2921 ↑ 0.01 (0.07 %) Net Assets (Cr) ₹6,996 on 28 Feb 21 Category Debt - Credit Risk AMC HDFC Asset Management Company Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.64 Sharpe Ratio 1.12 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 7.94% Effective Maturity 2 Years 5 Months 10 Days Modified Duration 1 Year 11 Months 13 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 16 ₹10,000 31 Mar 17 ₹11,048 31 Mar 18 ₹11,743 31 Mar 19 ₹12,431 31 Mar 20 ₹13,565 31 Mar 21 ₹14,837 Returns for HDFC Credit Risk Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 12 Apr 21 Duration Returns 1 Month 1.1% 3 Month 1.3% 6 Month 4.8% 1 Year 10.8% 3 Year 8.2% 5 Year 8.2% 10 Year 15 Year Since launch 8.9% 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 7.02 Yr. Anand Laddha 21 Oct 20 0.44 Yr. Data below for HDFC Credit Risk Debt Fund as on 28 Feb 21
Asset Allocation
Asset Class Value Cash 18.62% Debt 81.38% Debt Sector Allocation
Sector Value Corporate 60.15% Government 22.66% Cash Equivalent 17.19% Credit Quality
Rating Value A 11.09% AA 52.7% AAA 33.01% BBB 2.85% Below B 0.34% Top Securities Holdings / Portfolio
Name Holding Value Quantity Indinfravit Trust
Unlisted bonds | -5% ₹354 Cr 3,500 Power Finance Corporation Limited
Debentures | -4% ₹306 Cr 2,790 Pipeline Infrastructure Private Limited
Debentures | -4% ₹291 Cr 2,700 Shriram - City Union Finance Limited
Debentures | -4% ₹282 Cr 28,000 Punjab National Bank
Debentures | -4% ₹281 Cr 2,725 DLF Limited
Debentures | -4% ₹250 Cr 2,500 Vedanta Limited
Debentures | -3% ₹233 Cr 2,327 Tata Motors Limited
Debentures | -3% ₹199 Cr 2,000 Tata Motors Limited
Debentures | -3% ₹191 Cr 1,900 Vedanta Limited
Debentures | -2% ₹150 Cr 1,500 5. ICICI Prudential Regular Savings Fund
CAGR/Annualized return of 8.7% 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 (12 Apr 21) ₹23.6448 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹7,117 on 28 Feb 21 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.57 Sharpe Ratio 1.5 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 7.54% Effective Maturity 1 Year 10 Months 6 Days Modified Duration 1 Year 4 Months 17 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 16 ₹10,000 31 Mar 17 ₹11,000 31 Mar 18 ₹11,757 31 Mar 19 ₹12,574 31 Mar 20 ₹13,773 31 Mar 21 ₹14,941 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 12 Apr 21 Duration Returns 1 Month 0.7% 3 Month 1% 6 Month 3.3% 1 Year 9.3% 3 Year 8.3% 5 Year 8.2% 10 Year 15 Year Since launch 8.7% 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 4.4 Yr. Akhil Kakkar 3 Jun 17 3.83 Yr. Data below for ICICI Prudential Regular Savings Fund as on 28 Feb 21
Asset Allocation
Asset Class Value Cash 17.76% Equity 3.38% Debt 78.86% Debt Sector Allocation
Sector Value Corporate 65.13% Cash Equivalent 17.76% Government 13.38% Securitized 0.34% Credit Quality
Rating Value A 13.92% AA 57.33% AAA 22.61% BBB 3.01% Top Securities Holdings / Portfolio
Name Holding Value Quantity 182 DTB 19082021
Sovereign Bonds | -7% ₹527 Cr 53,500,000
↑ 53,500,000 Prestige Estates Projects Limited
Debentures | -4% ₹249 Cr 2,500 Kalpataru Properties (Thane) Private Limited
Debentures | -3% ₹200 Cr 2,000 Aditya Birla Fashion and Retail Limited
Debentures | -3% ₹200 Cr 1,750 TMF Holdings Limited
Debentures | -3% ₹180 Cr 1,500 The Great Eastern Shipping Company Limited
Debentures | -2% ₹174 Cr 1,743 MTNL
Debentures | -2% ₹174 Cr 1,770
↓ -30 ICICI Bank Limited
Debentures | -2% ₹166 Cr 1,586 Vedanta Limited
Debentures | -2% ₹165 Cr 1,650 Adarsh Advisory Services Private Limited
Debentures | -2% ₹163 Cr 1,166 6. Aditya Birla Sun Life Credit Risk Fund
CAGR/Annualized return of 7.5% 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 (12 Apr 21) ₹15.3987 ↑ 0.01 (0.08 %) Net Assets (Cr) ₹1,577 on 28 Feb 21 Category Debt - Credit Risk AMC Birla Sun Life Asset Management Co Ltd Rating Risk Moderate Expense Ratio 1.6 Sharpe Ratio 1.05 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 7.38% Effective Maturity 1 Year 9 Months 14 Days Modified Duration 1 Year 5 Months 16 Days Growth of 10,000 investment over the years.
Date Value 31 Mar 16 ₹10,000 31 Mar 17 ₹11,029 31 Mar 18 ₹11,915 31 Mar 19 ₹12,601 31 Mar 20 ₹12,947 31 Mar 21 ₹14,132 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 12 Apr 21 Duration Returns 1 Month 0.9% 3 Month 1.9% 6 Month 4.5% 1 Year 11.3% 3 Year 5.9% 5 Year 7.1% 10 Year 15 Year Since launch 7.5% 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 4 Yr. Mohit Sharma 6 Aug 20 0.65 Yr. Data below for Aditya Birla Sun Life Credit Risk Fund as on 28 Feb 21
Asset Allocation
Asset Class Value Cash 9.35% Equity 0.32% Debt 90.32% Debt Sector Allocation
Sector Value Corporate 69.71% Government 20.61% Cash Equivalent 9.35% Credit Quality
Rating Value A 20.27% AA 46.15% AAA 30.49% BBB 1.2% Below B 1.88% Top Securities Holdings / Portfolio
Name Holding Value Quantity L&T Vadodara Bharuch Tollway Limited
Debentures | -11% ₹171 Cr 170,850 Shriram - City Union Finance Limited
Debentures | -9% ₹141 Cr 1,400 L&T Infrastructure Finance Company Limited
Debentures | -6% ₹88 Cr 850 8.35% Govt Stock 2022
Sovereign Bonds | -5% ₹79 Cr 7,500,000 Indusind Bank Limited
Debentures | -4% ₹71 Cr 700 Coastal Gujarat Power Limited
Debentures | -3% ₹52 Cr 513 L&T Infrastructure Finance Company Limited
Debentures | -3% ₹52 Cr 500 Tata Housing Development Company Limited
Debentures | -2% ₹39 Cr 350 Tata Realty and Infrastructure Limited
Debentures | -2% ₹36 Cr 350 LIC Housing Finance Limited
Debentures | -2% ₹35 Cr 350
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?
Open Free Investment Account for Lifetime at Fincash.com.
Complete your Registration and KYC Process
Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!
FAQs
1. How do debt fund managers identify which is high-quality security?
A: Debt fund managers have their techniques for evaluating each bond and assessing the debtor's chances of defaulting to pay the bond. Usually, the higher the credit rating lesser is the chance for the creditor defaulting.
2. Why is debt mutual funds low-risk?
A: Debt mutual funds deal with securities and bonds along other money market instruments. The chances of these instruments failing are usually less, and hence, your investment will remain secure, thereby making debt mutual funds low-risk investments.
3. Do fund managers invest in low-quality securities?
A: Yes, sometimes fund managers do invest in low-quality securities if chances of good ROI exist. However, this will be a calculated risk taken by your fund manager and only if the portfolio of investment already has stable, high-quality securities.
4. Is there any short-term debt mutual fund?
A: Yes, if you opt for a Liquid Fund in which investments are made in money market instruments that have a maturity of 91 days, then you can realize your investment in a matter of three months. This is a short-term investment that you can undertake to get a better understanding of debt mutual funds.
5. Can I invest long-term in a debt mutual fund?
A: Yes, you can invest long-term in debt mutual funds. For example, suppose you invest in the Nippon India Credit Risk Fund or the ICICI Prudential Regular Savings Fund. In that case, it is better that you hold your investment at least for one year, 5 months, and 19 days and 2 years, one month, and 2 days respectively, to get maximum ROI. But you can keep investing beyond that for 3 years.
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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