Table of Contents
6 Best Debt Mutual Funds for Lump sum Investments 2024
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
Talk to our investment specialist
Best Lumpsum Debt Mutual Funds FY 24 - 25
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 (%) 2023 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Nippon India Credit Risk Fund Growth ₹32.2181
↑ 0.02 ₹1,027 500 2.1 4.1 7.7 6.4 7.9 8.93% 1Y 10M 6D 2Y 2M 8D ICICI Prudential Regular Savings Fund Growth ₹29.3409
↑ 0.02 ₹6,725 10,000 2.3 4 8.1 6.6 7.2 8.82% 2Y 4D 2Y 7M 17D L&T Credit Risk Fund Growth ₹26.8067
↑ 0.02 ₹570 10,000 2 3.6 6.7 5.7 6.5 8.13% 2Y 2M 26D 2Y 11M 23D Mahindra Low Duration Bachat Yojana Growth ₹1,529.19
↑ 0.48 ₹518 1,000 1.7 3.6 6.9 5.3 6.7 8% 11M 1D 1Y 5M 4D Nippon India Ultra Short Duration Fund Growth ₹3,774.27
↑ 0.75 ₹6,040 100 1.7 3.7 7 5.7 6.7 7.99% 5M 28D 7M 2D HDFC Low Duration Fund Growth ₹53.9212
↑ 0.03 ₹18,702 5,000 1.8 3.8 7.1 5.6 7 7.94% 10M 28D 2Y 22D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 26 Jul 24
(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 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 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 (Erstwhile Mahindra ALP-Samay Bachat Yojana) The investment objective of the Scheme is to provide reasonable returns, commensurate with a low to moderate level of risk and high degree of liquidity, through a portfolio constituted of money market and debt instruments. However, there is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns. Mahindra Low Duration Bachat Yojana is a Debt - Low Duration fund was launched on 15 Feb 17. It is a fund with Moderately Low risk and has given a Below is the key information for Mahindra Low Duration Bachat Yojana Returns up to 1 year are on (Erstwhile Reliance Liquid Fund - Cash Plan) The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity. Accordingly, investments shall predominantly be made in Debt and Money Market Instruments. Nippon India Ultra Short Duration Fund is a Debt - Ultrashort Bond fund was launched on 7 Dec 01. It is a fund with Low risk and has given a Below is the key information for Nippon India Ultra Short Duration Fund Returns up to 1 year are on (Erstwhile HDFC Cash Management Fund - Treasury Advantage Plan) To generate regular income through investment in debt securities and money market instruments. HDFC Low Duration Fund is a Debt - Low Duration fund was launched on 18 Nov 99. It is a fund with Moderately Low risk and has given a Below is the key information for HDFC Low Duration Fund Returns up to 1 year are on 1. Nippon India Credit Risk Fund
CAGR/Annualized return of 6.3% since its launch. Ranked 21 in Credit Risk category. Return for 2023 was 7.9% , 2022 was 3.9% and 2021 was 13.5% . Nippon India Credit Risk Fund
Growth Launch Date 8 Jun 05 NAV (26 Jul 24) ₹32.2181 ↑ 0.02 (0.05 %) Net Assets (Cr) ₹1,027 on 30 Jun 24 Category Debt - Credit Risk AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.64 Sharpe Ratio 1.57 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 8.93% Effective Maturity 2 Years 2 Months 8 Days Modified Duration 1 Year 10 Months 6 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 19 ₹10,000 30 Jun 20 ₹9,123 30 Jun 21 ₹9,943 30 Jun 22 ₹10,975 30 Jun 23 ₹11,804 30 Jun 24 ₹12,699 Returns for Nippon India Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 26 Jul 24 Duration Returns 1 Month 0.7% 3 Month 2.1% 6 Month 4.1% 1 Year 7.7% 3 Year 6.4% 5 Year 4.9% 10 Year 15 Year Since launch 6.3% Historical performance (Yearly) on absolute basis
Year Returns 2023 7.9% 2022 3.9% 2021 13.5% 2020 -5.9% 2019 1.9% 2018 6.1% 2017 7% 2016 10% 2015 8.8% 2014 11% Fund Manager information for Nippon India Credit Risk Fund
Name Since Tenure Kinjal Desai 25 May 18 6.11 Yr. Sushil Budhia 1 Feb 20 4.42 Yr. Data below for Nippon India Credit Risk Fund as on 30 Jun 24
Asset Allocation
Asset Class Value Cash 7.17% Debt 92.57% Other 0.26% Debt Sector Allocation
Sector Value Corporate 79.82% Government 12.75% Cash Equivalent 7.17% Credit Quality
Rating Value A 18.82% AA 47.01% AAA 34.17% Top Securities Holdings / Portfolio
Name Holding Value Quantity Summit Digitel Infrastructure Limited
Debentures | -6% ₹61 Cr 620 7.1% Govt Stock 2029
Sovereign Bonds | -5% ₹50 Cr 5,000,000 JSW Steel Limited
Debentures | -5% ₹50 Cr 500 7.06% Govt Stock 2028
Sovereign Bonds | -5% ₹50 Cr 5,000,000 Indinfravit Trust
Debentures | -5% ₹49 Cr 5,000 Shriram Housing Finance Limited 9.25%
Debentures | -4% ₹40 Cr 4,000 Greenlam Industries Limited
Debentures | -4% ₹40 Cr 405 Prestige Projects Private Limited 11.75%
Debentures | -4% ₹40 Cr 4,000 DLF Cyber City Developers Limited 8.4%
Debentures | -4% ₹40 Cr 4,000 Lodha Developers Private Limited
Debentures | -4% ₹38 Cr 378 2. ICICI Prudential Regular Savings Fund
CAGR/Annualized return of 8.2% since its launch. Ranked 26 in Credit Risk category. Return for 2023 was 7.2% , 2022 was 5.1% and 2021 was 6.2% . ICICI Prudential Regular Savings Fund
Growth Launch Date 3 Dec 10 NAV (26 Jul 24) ₹29.3409 ↑ 0.02 (0.06 %) Net Assets (Cr) ₹6,725 on 15 Jul 24 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.54 Sharpe Ratio 0.89 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 8.82% Effective Maturity 2 Years 7 Months 17 Days Modified Duration 2 Years 4 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 19 ₹10,000 30 Jun 20 ₹10,985 30 Jun 21 ₹11,953 30 Jun 22 ₹12,486 30 Jun 23 ₹13,350 30 Jun 24 ₹14,391 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 26 Jul 24 Duration Returns 1 Month 0.9% 3 Month 2.3% 6 Month 4% 1 Year 8.1% 3 Year 6.6% 5 Year 7.6% 10 Year 15 Year Since launch 8.2% Historical performance (Yearly) on absolute basis
Year Returns 2023 7.2% 2022 5.1% 2021 6.2% 2020 9.8% 2019 9.5% 2018 6.6% 2017 6.8% 2016 9.5% 2015 9% 2014 11% Fund Manager information for ICICI Prudential Regular Savings Fund
Name Since Tenure Manish Banthia 7 Nov 16 7.65 Yr. Akhil Kakkar 22 Jan 24 0.44 Yr. Data below for ICICI Prudential Regular Savings Fund as on 15 Jul 24
Asset Allocation
Asset Class Value Cash 12.52% Equity 1.88% Debt 85.3% Other 0.3% Debt Sector Allocation
Sector Value Corporate 70.27% Government 11.48% Cash Equivalent 10.74% Securitized 5.32% Credit Quality
Rating Value A 18.36% AA 61.82% AAA 19.82% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.18% Govt Stock 2033
Sovereign Bonds | -8% ₹512 Cr 50,630,230
↓ -8,375,000 Embassy Office Parks Reit
Unlisted bonds | -5% ₹305 Cr 8,456,117 Varroc Engineering Limited
Debentures | -4% ₹247 Cr 25,000 Millennia Realtors Private Limited
Debentures | -3% ₹210 Cr 2,100 7.1% Govt Stock 2034
Sovereign Bonds | -3% ₹190 Cr 18,795,630
↑ 8,375,000 Aadhar Housing Finance Ltd
Debentures | -3% ₹176 Cr 17,500 Nirma Limited
Debentures | -2% ₹150 Cr 15,000 Dlf Home Developers Limited
Debentures | -2% ₹150 Cr 15,000 Kalpataru Projects International Limited
Debentures | -2% ₹149 Cr 15,000 Aadharshila Infratech Pvt Ltd.
Debentures | -2% ₹144 Cr 15,000 3. L&T Credit Risk Fund
CAGR/Annualized return of 6.9% since its launch. Ranked 12 in Credit Risk category. Return for 2023 was 6.5% , 2022 was 3.2% and 2021 was 5.7% . L&T Credit Risk Fund
Growth Launch Date 8 Oct 09 NAV (26 Jul 24) ₹26.8067 ↑ 0.02 (0.07 %) Net Assets (Cr) ₹570 on 30 Jun 24 Category Debt - Credit Risk AMC L&T Investment Management Ltd Rating ☆☆☆ Risk Moderate Expense Ratio 1.66 Sharpe Ratio -0.83 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 1,000 Exit Load 0-1 Years (1%),1 Years and above(NIL) Yield to Maturity 8.13% Effective Maturity 2 Years 11 Months 23 Days Modified Duration 2 Years 2 Months 26 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 19 ₹10,000 30 Jun 20 ₹9,913 30 Jun 21 ₹10,816 30 Jun 22 ₹11,263 30 Jun 23 ₹11,971 30 Jun 24 ₹12,767 Returns for L&T Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 26 Jul 24 Duration Returns 1 Month 0.6% 3 Month 2% 6 Month 3.6% 1 Year 6.7% 3 Year 5.7% 5 Year 4.9% 10 Year 15 Year Since launch 6.9% Historical performance (Yearly) on absolute basis
Year Returns 2023 6.5% 2022 3.2% 2021 5.7% 2020 5% 2019 2.3% 2018 5.6% 2017 7.2% 2016 10.1% 2015 9.4% 2014 11.4% Fund Manager information for L&T Credit Risk Fund
Name Since Tenure Kapil Punjabi 26 Nov 22 1.59 Yr. Shriram Ramanathan 24 Nov 12 11.61 Yr. Data below for L&T Credit Risk Fund as on 30 Jun 24
Asset Allocation
Asset Class Value Cash 9.81% Debt 89.94% Other 0.25% Debt Sector Allocation
Sector Value Corporate 66.32% Government 23.62% Cash Equivalent 9.81% Credit Quality
Rating Value AA 64.09% AAA 35.91% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.18% Govt Stock 2033
Sovereign Bonds | -23% ₹129 Cr 12,500,000 Godrej Industries Limited
Debentures | -5% ₹27 Cr 275
↑ 125 Nuvoco Vistas Corporation Limited
Debentures | -5% ₹26 Cr 250 Dlf Cyber City Developers Ltd
Debentures | -5% ₹26 Cr 250 Nirma Limited
Debentures | -5% ₹26 Cr 2,500 Small Industries Development Bank Of India
Debentures | -5% ₹26 Cr 2,500 JSW Steel Limited
Debentures | -4% ₹26 Cr 250 Tata Projects Limited
Debentures | -4% ₹22 Cr 2,000 Jm Financial Services Limited
Debentures | -4% ₹21 Cr 2,000 Hinduja Leyland Finance Limited
Debentures | -4% ₹21 Cr 180 4. Mahindra Low Duration Bachat Yojana
CAGR/Annualized return of 5.9% since its launch. Return for 2023 was 6.7% , 2022 was 3.7% and 2021 was 3.1% . Mahindra Low Duration Bachat Yojana
Growth Launch Date 15 Feb 17 NAV (26 Jul 24) ₹1,529.19 ↑ 0.48 (0.03 %) Net Assets (Cr) ₹518 on 15 Jun 24 Category Debt - Low Duration AMC Mahindra Asset Management Company Pvt. Ltd. Rating Risk Moderately Low Expense Ratio 1.16 Sharpe Ratio -1.03 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 8% Effective Maturity 1 Year 5 Months 4 Days Modified Duration 11 Months 1 Day Growth of 10,000 investment over the years.
Date Value 30 Jun 19 ₹10,000 30 Jun 20 ₹10,775 30 Jun 21 ₹11,202 30 Jun 22 ₹11,510 30 Jun 23 ₹12,198 30 Jun 24 ₹13,030 Returns for Mahindra Low Duration Bachat Yojana
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 26 Jul 24 Duration Returns 1 Month 0.6% 3 Month 1.7% 6 Month 3.6% 1 Year 6.9% 3 Year 5.3% 5 Year 5.4% 10 Year 15 Year Since launch 5.9% Historical performance (Yearly) on absolute basis
Year Returns 2023 6.7% 2022 3.7% 2021 3.1% 2020 6.3% 2019 7.9% 2018 6.5% 2017 2016 2015 2014 Fund Manager information for Mahindra Low Duration Bachat Yojana
Name Since Tenure Rahul Pal 15 Feb 17 7.38 Yr. Data below for Mahindra Low Duration Bachat Yojana as on 15 Jun 24
Asset Allocation
Asset Class Value Cash 29.14% Debt 70.62% Other 0.24% Debt Sector Allocation
Sector Value Corporate 70.16% Cash Equivalent 15.24% Government 14.36% Credit Quality
Rating Value AA 37.59% AAA 62.41% Top Securities Holdings / Portfolio
Name Holding Value Quantity Godrej Industries Limited
Debentures | -5% ₹28 Cr 2,850,000 Shriram Finance Limited
Debentures | -5% ₹25 Cr 2,500,000 Small Industries Development Bank Of India
Debentures | -5% ₹25 Cr 2,500,000 Export Import Bank Of India
Debentures | -5% ₹25 Cr 2,500,000 360 One Prime Limited
Debentures | -5% ₹24 Cr 2,400,000 Godrej Properties Limited
Debentures | -5% ₹24 Cr 2,400,000 8.34% Govt Stock 2033
Sovereign Bonds | -4% ₹20 Cr 2,000,000 Bharti Telecom Limited
Debentures | -4% ₹20 Cr 2,000,000 Tata Realty And Infrastructure Limited
Debentures | -4% ₹20 Cr 2,000,000 Rec Limited
Debentures | -4% ₹20 Cr 2,000,000 5. Nippon India Ultra Short Duration Fund
CAGR/Annualized return of 6% since its launch. Ranked 62 in Ultrashort Bond category. Return for 2023 was 6.7% , 2022 was 4.6% and 2021 was 7.8% . Nippon India Ultra Short Duration Fund
Growth Launch Date 7 Dec 01 NAV (26 Jul 24) ₹3,774.27 ↑ 0.75 (0.02 %) Net Assets (Cr) ₹6,040 on 30 Jun 24 Category Debt - Ultrashort Bond AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Low Expense Ratio 1.17 Sharpe Ratio -0.73 Information Ratio 0 Alpha Ratio 0 Min Investment 100 Min SIP Investment 100 Exit Load NIL Yield to Maturity 7.99% Effective Maturity 7 Months 2 Days Modified Duration 5 Months 28 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 19 ₹10,000 30 Jun 20 ₹10,195 30 Jun 21 ₹10,769 30 Jun 22 ₹11,448 30 Jun 23 ₹12,156 30 Jun 24 ₹12,996 Returns for Nippon India Ultra Short Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 26 Jul 24 Duration Returns 1 Month 0.6% 3 Month 1.7% 6 Month 3.7% 1 Year 7% 3 Year 5.7% 5 Year 5.3% 10 Year 15 Year Since launch 6% Historical performance (Yearly) on absolute basis
Year Returns 2023 6.7% 2022 4.6% 2021 7.8% 2020 4.9% 2019 0.9% 2018 7.3% 2017 5.8% 2016 6.8% 2015 7.6% 2014 8.4% Fund Manager information for Nippon India Ultra Short Duration Fund
Name Since Tenure Vivek Sharma 1 Oct 13 10.76 Yr. Kinjal Desai 25 May 18 6.11 Yr. Akshay Sharma 1 Dec 22 1.58 Yr. Data below for Nippon India Ultra Short Duration Fund as on 30 Jun 24
Asset Allocation
Asset Class Value Cash 60.47% Debt 39.3% Other 0.23% Debt Sector Allocation
Sector Value Corporate 66% Cash Equivalent 21.84% Government 11.27% Securitized 0.66% Credit Quality
Rating Value AA 15.9% AAA 84.1% Top Securities Holdings / Portfolio
Name Holding Value Quantity India (Republic of)
- | -8% ₹493 Cr 50,000,000 Power Finance Corporation Limited
Debentures | -4% ₹266 Cr 2,650 Dlf Cyber City Developers Ltd
Debentures | -4% ₹258 Cr 2,590 Indinfravit Trust
Debentures | -4% ₹214 Cr 22,000 182 DTB 22082024
Sovereign Bonds | -3% ₹193 Cr 19,500,000 Rec Limited
Debentures | -3% ₹180 Cr 1,850 India (Republic of)
- | -2% ₹103 Cr 10,500,000 Shriram Finance Limited
Debentures | -2% ₹100 Cr 1,000 Bharti Telecom Limited
Debentures | -2% ₹100 Cr 1,000 National Housing Bank
Debentures | -2% ₹100 Cr 10,000 6. HDFC Low Duration Fund
CAGR/Annualized return of 7.1% since its launch. Return for 2023 was 7% , 2022 was 4.1% and 2021 was 3.7% . HDFC Low Duration Fund
Growth Launch Date 18 Nov 99 NAV (26 Jul 24) ₹53.9212 ↑ 0.03 (0.06 %) Net Assets (Cr) ₹18,702 on 30 Jun 24 Category Debt - Low Duration AMC HDFC Asset Management Company Limited Rating ☆☆☆ Risk Moderately Low Expense Ratio 1.03 Sharpe Ratio 0.18 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 300 Exit Load NIL Yield to Maturity 7.94% Effective Maturity 2 Years 22 Days Modified Duration 10 Months 28 Days Growth of 10,000 investment over the years.
Date Value 30 Jun 19 ₹10,000 30 Jun 20 ₹10,826 30 Jun 21 ₹11,439 30 Jun 22 ₹11,777 30 Jun 23 ₹12,564 30 Jun 24 ₹13,457 Returns for HDFC Low Duration Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 26 Jul 24 Duration Returns 1 Month 0.6% 3 Month 1.8% 6 Month 3.8% 1 Year 7.1% 3 Year 5.6% 5 Year 6.1% 10 Year 15 Year Since launch 7.1% Historical performance (Yearly) on absolute basis
Year Returns 2023 7% 2022 4.1% 2021 3.7% 2020 8.1% 2019 8% 2018 6.5% 2017 6.4% 2016 8.6% 2015 7.7% 2014 8.4% Fund Manager information for HDFC Low Duration Fund
Name Since Tenure Anupam Joshi 27 Oct 15 8.68 Yr. Praveen Jain 6 Oct 22 1.73 Yr. Dhruv Muchhal 22 Jun 23 1.02 Yr. Data below for HDFC Low Duration Fund as on 30 Jun 24
Asset Allocation
Asset Class Value Cash 27.49% Debt 71.89% Other 0.22% Debt Sector Allocation
Sector Value Corporate 66.34% Government 22.6% Cash Equivalent 10.83% Credit Quality
Rating Value AA 12.41% AAA 87.59% Top Securities Holdings / Portfolio
Name Holding Value Quantity 8.34% Govt Stock 2033
Sovereign Bonds | -7% ₹1,305 Cr 127,500,000 Power Finance Corporation Limited
Debentures | -3% ₹597 Cr 5,950 Titan Company Limited
Debentures | -3% ₹526 Cr 52,500 7.98% Govt Stock 2031
Sovereign Bonds | -3% ₹506 Cr 50,000,000
↑ 40,000,000 7.72% Govt Stock 2028
Sovereign Bonds | -3% ₹502 Cr 50,000,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹399 Cr 4,000 Bharti Telecom Limited
Debentures | -2% ₹335 Cr 3,350 SANSAR TRUST JULY 2023 II
Unlisted bonds | -2% ₹332 Cr 4,500 Small Industries Development Bank Of India
Debentures | -1% ₹274 Cr 2,750 Power Finance Corporation Limited
Debentures | -1% ₹274 Cr 2,750
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.
You Might Also Like
AMFI Registration No. 112358 | CIN: U74999MH2016PTC282153
Shepard Technologies Pvt. Ltd. (with ARN code 112358) makes no warranties or representations, express or implied, on products offered through the platform. It accepts no liability for any damages or losses, however caused, in connection with the use of, or on the reliance of its product or related services. Terms and conditions of the website are applicable.
©2024 Shepard Technologies Private Limited. All Rights Reserved