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6 Best Debt Mutual Funds for Lump sum Investments 2019
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 19 - 20
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 (%) 2018 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Reliance Credit Risk Fund Growth ₹25.5813
↓ 0.00 ₹6,067 500 0 0.8 2.2 4.9 13.11% 1Y 9M 2Y 5M 5D Aditya Birla Sun Life Credit Risk Fund Growth ₹13.725
↓ 0.00 ₹5,904 1,000 -2.9 -0.2 2.3 5.5 12.51% 1Y 4M 13D 1Y 9M 14D Franklin India Low Duration Fund Growth ₹22.2133
↑ 0.00 ₹5,704 10,000 -0.9 1.3 5.4 7.3 10.98% 10M 28D 1Y 2M 5D L&T Credit Risk Fund Growth ₹21.0205
↓ -0.01 ₹2,093 10,000 -0.9 1.5 2.4 4.9 9.6% 1Y 7M 20D 2Y 3M ICICI Prudential Regular Savings Fund Growth ₹21.1646
↓ -0.01 ₹11,364 10,000 2.6 5.1 9.5 7.5 9.53% 1Y 5M 23D 1Y 10M 10D Reliance Prime Debt Fund Growth ₹40.9659
↓ -0.01 ₹957 1,000 1.2 4.1 7.9 7 9.48% 1Y 7M 20D 1Y 11M 12D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 11 Dec 19
(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. Reliance 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 Reliance 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 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 L&T Income Opportunities Fund) The Scheme seeks to generate regular returns and capital appreciation by investing in debt (including securitised debt), government and money market securities. L&T Credit Risk Fund is a Debt - Credit Risk fund was launched on 8 Oct 09. It is a fund with Moderate risk and has given a Below is the key information for L&T Credit Risk 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 Reliance Medium Term Fund) The primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit-holders and the secondary objective is growth of capital. Reliance Prime Debt Fund is a Debt - Corporate Bond fund was launched on 14 Sep 00. It is a fund with Moderately Low risk and has given a Below is the key information for Reliance Prime Debt Fund Returns up to 1 year are on 1. Reliance Credit Risk Fund
CAGR/Annualized return of 6.7% since its launch. Ranked 21 in Credit Risk category. . Reliance Credit Risk Fund
Growth Launch Date 8 Jun 05 NAV (11 Dec 19) ₹25.5813 ↓ 0.00 (-0.02 %) Net Assets (Cr) ₹6,067 on 31 Oct 19 Category Debt - Credit Risk AMC Reliance Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.82 Sharpe Ratio 0.1 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 13.11% Effective Maturity 2 Years 5 Months 5 Days Modified Duration 1 Year 9 Months Growth of 10,000 investment over the years.
Date Value 30 Nov 14 ₹10,000 30 Nov 15 ₹10,880 30 Nov 16 ₹12,063 30 Nov 17 ₹12,885 30 Nov 18 ₹13,544 30 Nov 19 ₹13,861 Returns for Reliance Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 11 Dec 19 Duration Returns 1 Month -0.4% 3 Month 0% 6 Month 0.8% 1 Year 2.2% 3 Year 4.9% 5 Year 6.7% 10 Year 15 Year Since launch 6.7% Historical performance (Yearly) on absolute basis
Year Returns 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fund Manager information for Reliance Credit Risk Fund
Name Since Tenure Prashant Pimple 9 Oct 09 9.98 Yr. Kinjal Desai 25 May 18 1.35 Yr. Data below for Reliance Credit Risk Fund as on 31 Oct 19
Asset Allocation
Asset Class Value Cash 4.81% Debt 95.19% Other 0% Debt Sector Allocation
Sector Value Corporate 95.19% Cash Equivalent 4.81% Credit Quality
Rating Value A 36.27% AA 28.65% AAA 0.01% BBB 22.69% Below B 0.86% Top Securities Holdings / Portfolio
Name Holding Value Quantity RMZ Buildcon Private Limited
Debentures | -12% ₹699 Cr 10,100 Yes Bank Limited
Debentures | -9% ₹538 Cr 6,500 MARIPOSA AGRI VENTURES AND HOSPITALITIES PRIVATE LIMITED
Debentures | -6% ₹345 Cr 3,000 Nirma Limited
Debentures | -5% ₹290 Cr 3,000 Vineha Enterprises Private Limited
Debentures | -5% ₹277 Cr 22,500 Renew Wind Energy (Rajasthan One) Private Limited
Debentures | -5% ₹273 Cr 3,060 Indiabulls Housing Finance Limited
Debentures | -4% ₹249 Cr 2,960 Sugee Builders Private Limited
Debentures | -4% ₹228 Cr 201 Aqua Space Developers Pvt. Ltd.
Debentures | -4% ₹215 Cr 2,150 Piramal Enterprises Limited
Debentures | -3% ₹205 Cr 2,096 2. Aditya Birla Sun Life Credit Risk Fund
CAGR/Annualized return of 7% since its launch. . Aditya Birla Sun Life Credit Risk Fund
Growth Launch Date 17 Apr 15 NAV (11 Dec 19) ₹13.725 ↓ 0.00 (-0.02 %) Net Assets (Cr) ₹5,904 on 31 Oct 19 Category Debt - Credit Risk AMC Birla Sun Life Asset Management Co Ltd Rating Risk Moderate Expense Ratio 1.72 Sharpe Ratio 1.29 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 12.51% Effective Maturity 1 Year 9 Months 14 Days Modified Duration 1 Year 4 Months 13 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 15 ₹10,537 30 Nov 16 ₹11,749 30 Nov 17 ₹12,627 30 Nov 18 ₹13,346 30 Nov 19 ₹13,702 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 11 Dec 19 Duration Returns 1 Month -2.6% 3 Month -2.9% 6 Month -0.2% 1 Year 2.3% 3 Year 5.5% 5 Year 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fund Manager information for Aditya Birla Sun Life Credit Risk Fund
Name Since Tenure Maneesh Dangi 17 Apr 15 4.54 Yr. Sunaina Cunha 1 Apr 17 2.58 Yr. Data below for Aditya Birla Sun Life Credit Risk Fund as on 31 Oct 19
Asset Allocation
Asset Class Value Cash 20.51% Equity 0.08% Debt 79.4% Debt Sector Allocation
Sector Value Corporate 63.47% Government 16.65% Cash Equivalent 16.3% Securitized 3.5% Credit Quality
Rating Value A 12.8% AA 26.62% AAA 49.68% BB 3.51% BBB 2.03% Below B 1.63% Top Securities Holdings / Portfolio
Name Holding Value Quantity SP Imperial Star Private Limited
Unlisted bonds | -4% ₹248 Cr 185 Adilink Infra & Multitrading Private Limited
Debentures | -4% ₹212 Cr 2,650 Housing And Urban Development Corporation Ltd.
Debentures | -3% ₹200 Cr 2,000
↑ 2,000 Sprit Textiles Private Limited
Debentures | -3% ₹199 Cr 1,585 NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -3% ₹184 Cr 1,750
↑ 450 Air India Assets Holding Limited
Debentures | -3% ₹176 Cr 1,750 L & T Vadodara Bharuch Tollway Limited
Debentures | -3% ₹170 Cr 170,850 Tata Motors Finance Limited
Debentures | -3% ₹169 Cr 1,330 Net Receivables / (Payables)
Net Current Assets | -3% ₹164 Cr ASIRVAD MICRO FINANCE LIMITED
Debentures | -3% ₹161 Cr 2,500 3. Franklin India Low Duration Fund
CAGR/Annualized return of 8.9% since its launch. Ranked 3 in Low Duration category. . Franklin India Low Duration Fund
Growth Launch Date 26 Jul 10 NAV (11 Dec 19) ₹22.2133 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹5,704 on 31 Oct 19 Category Debt - Low Duration AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 0.78 Sharpe Ratio 3.09 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 10.98% Effective Maturity 1 Year 2 Months 5 Days Modified Duration 10 Months 28 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 14 ₹10,000 30 Nov 15 ₹10,995 30 Nov 16 ₹12,096 30 Nov 17 ₹13,107 30 Nov 18 ₹14,117 30 Nov 19 ₹15,203 Returns for Franklin India Low Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 11 Dec 19 Duration Returns 1 Month -1.2% 3 Month -0.9% 6 Month 1.3% 1 Year 5.4% 3 Year 7.3% 5 Year 8.3% 10 Year 15 Year Since launch 8.9% Historical performance (Yearly) on absolute basis
Year Returns 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fund Manager information for Franklin India Low Duration Fund
Name Since Tenure Santosh Kamath 15 Apr 14 5.55 Yr. Kunal Agrawal 15 Apr 14 5.55 Yr. Data below for Franklin India Low Duration Fund as on 31 Oct 19
Asset Allocation
Asset Class Value Cash 21.34% Debt 76.65% Other 2.01% Debt Sector Allocation
Sector Value Corporate 89.58% Cash Equivalent 6.81% Government 1.6% Credit Quality
Rating Value A 39.83% AA 30.92% AAA 23.58% BB 4.54% Below B 1.13% Top Securities Holdings / Portfolio
Name Holding Value Quantity Greenko Clean Energy Projects Private Limited
Debentures | -5% ₹300 Cr 30,000 Small Business Fincredit India Private Limited
Debentures | -4% ₹247 Cr 2,500 Renew Power Ventures Private Limited
Debentures | -4% ₹217 Cr 2,170 PIRAMAL CAPITAL & HOUSING FINANCE LIMITED
Debentures | -4% ₹200 Cr 2,500 ESS KAY FINCORP LIMITED
Debentures | -3% ₹196 Cr 2,000 Tata Projects Limited
Commercial Paper | -3% ₹190 Cr 4,000 Vodafone Mobile Services Limited
Debentures | -3% ₹175 Cr 1,970 HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
Commercial Paper | -3% ₹167 Cr 3,400
↓ -100 ReNew Solar Power Private Limited
Debentures | -3% ₹154 Cr 1,498 Essel Infraprojects Limited
Debentures | -3% ₹154 Cr 110 4. L&T Credit Risk Fund
CAGR/Annualized return of 7.6% since its launch. Ranked 12 in Credit Risk category. . L&T Credit Risk Fund
Growth Launch Date 8 Oct 09 NAV (11 Dec 19) ₹21.0205 ↓ -0.01 (-0.03 %) Net Assets (Cr) ₹2,093 on 31 Oct 19 Category Debt - Credit Risk AMC L&T Investment Management Ltd Rating ☆☆☆ Risk Moderate Expense Ratio 1.83 Sharpe Ratio -0.13 Information Ratio -1.33 Alpha Ratio -14.5 Min Investment 10,000 Min SIP Investment 1,000 Exit Load 0-1 Years (1%),1 Years and above(NIL) Yield to Maturity 9.6% Effective Maturity 2 Years 3 Months Modified Duration 1 Year 7 Months 20 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 14 ₹10,000 30 Nov 15 ₹10,975 30 Nov 16 ₹12,149 30 Nov 17 ₹12,984 30 Nov 18 ₹13,604 30 Nov 19 ₹13,974 Returns for L&T Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 11 Dec 19 Duration Returns 1 Month 0.6% 3 Month -0.9% 6 Month 1.5% 1 Year 2.4% 3 Year 4.9% 5 Year 6.8% 10 Year 15 Year Since launch 7.6% Historical performance (Yearly) on absolute basis
Year Returns 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fund Manager information for L&T Credit Risk Fund
Name Since Tenure Shriram Ramanathan 24 Nov 12 7.02 Yr. Vikas Garg 3 Apr 17 2.66 Yr. Data below for L&T Credit Risk Fund as on 31 Oct 19
Asset Allocation
Asset Class Value Cash 0.86% Debt 94.32% Other 4.82% Debt Sector Allocation
Sector Value Corporate 80.67% Government 13.66% Cash Equivalent 0.86% Credit Quality
Rating Value A 34.62% AA 40.15% AAA 24.98% Top Securities Holdings / Portfolio
Name Holding Value Quantity Green Infra Wind Energy Limited
Debentures | -8% ₹150 Cr 1,500 Samasta Microfinance Limited
Debentures | -8% ₹149 Cr 1,500 Renew Power Ventures Private Limited
Debentures | -6% ₹119 Cr 1,210 Bharat Aluminium Company Limited
Debentures | -6% ₹115 Cr 1,150 Vizag General Cargo Berth Private Limited
Debentures | -5% ₹99 Cr 1,000 Tata Power Renewable Energy Limited
Debentures | -5% ₹99 Cr 1,000 (B) Net Receivables/(Payables)
Receivables | -5% ₹95 Cr Jhajjar Power Limited
Debentures | -5% ₹90 Cr 90 Syndicate Bank
Debentures | -4% ₹86 Cr 835
↓ -150 NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -4% ₹85 Cr 800 5. ICICI Prudential Regular Savings Fund
CAGR/Annualized return of 8.7% since its launch. Ranked 26 in Credit Risk category. . ICICI Prudential Regular Savings Fund
Growth Launch Date 3 Dec 10 NAV (11 Dec 19) ₹21.1646 ↓ -0.01 (-0.05 %) Net Assets (Cr) ₹11,364 on 31 Oct 19 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.81 Sharpe Ratio 4.98 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 9.53% Effective Maturity 1 Year 10 Months 10 Days Modified Duration 1 Year 5 Months 23 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 14 ₹10,000 30 Nov 15 ₹10,922 30 Nov 16 ₹12,034 30 Nov 17 ₹12,828 30 Nov 18 ₹13,592 30 Nov 19 ₹14,925 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 11 Dec 19 Duration Returns 1 Month 0.9% 3 Month 2.6% 6 Month 5.1% 1 Year 9.5% 3 Year 7.5% 5 Year 8.2% 10 Year 15 Year Since launch 8.7% Historical performance (Yearly) on absolute basis
Year Returns 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fund Manager information for ICICI Prudential Regular Savings Fund
Name Since Tenure Manish Banthia 7 Nov 16 2.39 Yr. Akhil Kakkar 3 Jun 17 1.82 Yr. Data below for ICICI Prudential Regular Savings Fund as on 31 Oct 19
Asset Allocation
Asset Class Value Cash 10.6% Equity 0.78% Debt 88.63% Debt Sector Allocation
Sector Value Corporate 87.23% Cash Equivalent 10.6% Government 1.1% Securitized 0.29% Credit Quality
Rating Value A 27.96% AA 53.94% AAA 12.59% BB 1.69% Top Securities Holdings / Portfolio
Name Holding Value Quantity ICICI Bank Limited
Debentures | -5% ₹607 Cr 5,990 Treps
CBLO/Reverse Repo | -4% ₹494 Cr PIPELINE INFRASTRUCTURE PRIVATE LIMITED
Debentures | -4% ₹440 Cr 4,359
↑ 1,320 Nuvoco Vistas Corporation Ltd.
Debentures | -3% ₹353 Cr 3,500 Welspun Renewables Energy Private Limited
Debentures | -3% ₹328 Cr 3,350 Aqua Space Developers Pvt. Ltd.
Debentures | -3% ₹300 Cr 3,000 Net Current Assets
Net Current Assets | -3% ₹298 Cr Muthoot Finance Limited
Debentures | -2% ₹281 Cr 2,870,000 Prestige Estates Projects Limited
Debentures | -2% ₹246 Cr 2,500 The Great Eastern Shipping Company Limited
Debentures | -2% ₹241 Cr 2,493
↑ 2,493 6. Reliance Prime Debt Fund
CAGR/Annualized return of 7.6% since its launch. Ranked 20 in Corporate Bond category. . Reliance Prime Debt Fund
Growth Launch Date 14 Sep 00 NAV (11 Dec 19) ₹40.9659 ↓ -0.01 (-0.01 %) Net Assets (Cr) ₹957 on 31 Oct 19 Category Debt - Corporate Bond AMC Reliance Nippon Life Asset Management Ltd. Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.71 Sharpe Ratio 2.94 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 100 Exit Load NIL Yield to Maturity 9.48% Effective Maturity 1 Year 11 Months 12 Days Modified Duration 1 Year 7 Months 20 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 14 ₹10,000 30 Nov 15 ₹10,894 30 Nov 16 ₹11,938 30 Nov 17 ₹12,719 30 Nov 18 ₹13,495 30 Nov 19 ₹14,584 Returns for Reliance Prime Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 11 Dec 19 Duration Returns 1 Month 0.6% 3 Month 1.2% 6 Month 4.1% 1 Year 7.9% 3 Year 7% 5 Year 7.8% 10 Year 15 Year Since launch 7.6% Historical performance (Yearly) on absolute basis
Year Returns 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Fund Manager information for Reliance Prime Debt Fund
Name Since Tenure Amit Tripathi 8 Oct 07 12.07 Yr. Anju Chhajer 9 Oct 09 10.07 Yr. Kinjal Desai 25 May 18 1.44 Yr. Data below for Reliance Prime Debt Fund as on 31 Oct 19
Asset Allocation
Asset Class Value Cash 3.94% Debt 96.06% Other 0% Debt Sector Allocation
Sector Value Corporate 71.14% Government 17.69% Securitized 7.23% Cash Equivalent 3.94% Credit Quality
Rating Value A 6.7% AA 19.83% AAA 73.47% Top Securities Holdings / Portfolio
Name Holding Value Quantity NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT
Debentures | -9% ₹84 Cr 800
↓ -250 Adani Transmission Limited
Debentures | -8% ₹81 Cr 808 Sansar Trust Sep 2017 III SR-A7 PTC
Unlisted bonds | -7% ₹69 Cr 73 EMBASSY OFFICE PARKS REIT
Debentures | -7% ₹69 Cr 650 Indiabulls Housing Finance Limited
Debentures | -7% ₹63 Cr 750 INDIAN RECEIVABLE TRUST 18 FEB 2019
Unlisted bonds | -6% ₹61 Cr 1,080 Power Finance Corporation Ltd.
Debentures | -5% ₹52 Cr 500 Larsen And Toubro Limited
Debentures | -5% ₹51 Cr 500 INDIA GRID TRUST
Debentures | -5% ₹51 Cr 500 Reliance Utilities And Power Private Limited
Debentures | -5% ₹49 Cr 500
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!
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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