Table of Contents
6 Best Debt Mutual Funds for Lump sum Investments 2022
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 22 - 23
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 (%) 2021 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Nippon India Credit Risk Fund Growth ₹27.5505
↑ 0.02 ₹1,110 500 1.4 3.2 13.4 2.8 13.5 6.89% 1Y 9M 4D 2Y 4M 2D ICICI Prudential Regular Savings Fund Growth ₹24.894
↓ 0.00 ₹8,416 10,000 1.3 2.7 6.3 8.4 6.2 6.88% 1Y 11M 8D 2Y 8M 23D Axis Credit Risk Fund Growth ₹17.0666
↑ 0.00 ₹754 5,000 1 2.5 5.9 6.1 6 6.59% 1Y 6M 14D 2Y 11D Aditya Birla Sun Life Credit Risk Fund Growth ₹16.0664
↑ 0.00 ₹1,403 1,000 1 2.4 6.3 5.9 6.4 6.5% 1Y 10M 28D 2Y 7M 10D UTI Credit Risk Fund Growth ₹13.7589
↑ 0.01 ₹554 5,000 0.8 18.7 21.7 -5.9 21.5 6.28% 1Y 6M 22D 3Y SBI Credit Risk Fund Growth ₹35.863
↑ 0.00 ₹3,289 5,000 0.8 2.4 5.2 6.9 5 6.18% 1Y 9M 2Y 1M 24D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 25 Jan 22
(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 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 UTI Income Opportunities Fund) The investment objective of the scheme is to generate reasonable income and capital appreciation by investing in debt and money market instruments across different maturities and credit ratings. There is no assurance that the investment objective of the scheme will be achieved. UTI Credit Risk Fund is a Debt - Credit Risk fund was launched on 19 Nov 12. It is a fund with Moderate risk and has given a Below is the key information for UTI Credit Risk Fund Returns up to 1 year are on (Erstwhile SBI Corporate Bond Fund) The investment objective will be to actively manage a portfolio of good
quality corporate debt as well as Money Market Instruments so as to provide
reasonable returns and liquidity to the Unit holders. However there is no
guarantee or assurance that the investment objective of the scheme will
be achieved. SBI Credit Risk Fund is a Debt - Credit Risk fund was launched on 19 Jul 04. It is a fund with Moderate risk and has given a Below is the key information for SBI Credit Risk 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 2021 was 13.5% , 2020 was -5.9% and 2019 was 1.9% . Nippon India Credit Risk Fund
Growth Launch Date 8 Jun 05 NAV (25 Jan 22) ₹27.5505 ↑ 0.02 (0.06 %) Net Assets (Cr) ₹1,110 on 31 Dec 21 Category Debt - Credit Risk AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.82 Sharpe Ratio 1.53 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 6.89% Effective Maturity 2 Years 4 Months 2 Days Modified Duration 1 Year 9 Months 4 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 16 ₹10,000 31 Dec 17 ₹10,703 31 Dec 18 ₹11,352 31 Dec 19 ₹11,572 31 Dec 20 ₹10,890 31 Dec 21 ₹12,361 Returns for Nippon India Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 25 Jan 22 Duration Returns 1 Month 0.5% 3 Month 1.4% 6 Month 3.2% 1 Year 13.4% 3 Year 2.8% 5 Year 4.2% 10 Year 15 Year Since launch 6.3% Historical performance (Yearly) on absolute basis
Year Returns 2021 13.5% 2020 -5.9% 2019 1.9% 2018 6.1% 2017 7% 2016 10% 2015 8.8% 2014 11% 2013 8% 2012 9.6% Fund Manager information for Nippon India Credit Risk Fund
Name Since Tenure Kinjal Desai 25 May 18 3.61 Yr. Sushil Budhia 1 Feb 20 1.92 Yr. Data below for Nippon India Credit Risk Fund as on 31 Dec 21
Asset Allocation
Asset Class Value Cash 13.59% Debt 86.41% Debt Sector Allocation
Sector Value Corporate 57.06% Government 24.33% Cash Equivalent 13.59% Securitized 5.02% Credit Quality
Rating Value A 22.3% AA 25.9% AAA 51.8% Top Securities Holdings / Portfolio
Name Holding Value Quantity Renew Wind Energy (Rajasthan One) Private Limited
Debentures | -5% ₹54 Cr 655 7.16% Govt Stock 2023
Sovereign Bonds | -5% ₹52 Cr 5,000,000 8.15% Govt Stock 2022
Sovereign Bonds | -4% ₹51 Cr 5,000,000 Tata Realty And Infrastructure Limited
Debentures | -4% ₹50 Cr 500 L&T Metro Rail (Hyderabad) Limited
Debentures | -4% ₹44 Cr 400 INNOVATION TRUST XXX
Unlisted bonds | -4% ₹41 Cr 187 5.22% Govt Stock 2025
Sovereign Bonds | -3% ₹40 Cr 4,000,000 Piramal Capital & Housing Finance Limited
Debentures | -3% ₹39 Cr 465,002 Grasim Industries Limited
Debentures | -3% ₹36 Cr 350 U.P. Power Corporation Limited
Debentures | -3% ₹36 Cr 350 2. ICICI Prudential Regular Savings Fund
CAGR/Annualized return of 8.5% since its launch. Ranked 26 in Credit Risk category. Return for 2021 was 6.2% , 2020 was 9.8% and 2019 was 9.5% . ICICI Prudential Regular Savings Fund
Growth Launch Date 3 Dec 10 NAV (25 Jan 22) ₹24.894 ↓ 0.00 (-0.01 %) Net Assets (Cr) ₹8,416 on 31 Dec 21 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.6 Sharpe Ratio 2.36 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 6.88% Effective Maturity 2 Years 8 Months 23 Days Modified Duration 1 Year 11 Months 8 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 16 ₹10,000 31 Dec 17 ₹10,677 31 Dec 18 ₹11,387 31 Dec 19 ₹12,466 31 Dec 20 ₹13,686 31 Dec 21 ₹14,539 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 25 Jan 22 Duration Returns 1 Month 0.4% 3 Month 1.3% 6 Month 2.7% 1 Year 6.3% 3 Year 8.4% 5 Year 7.7% 10 Year 15 Year Since launch 8.5% Historical performance (Yearly) on absolute basis
Year Returns 2021 6.2% 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% Fund Manager information for ICICI Prudential Regular Savings Fund
Name Since Tenure Manish Banthia 7 Nov 16 5.15 Yr. Akhil Kakkar 3 Jun 17 4.58 Yr. Data below for ICICI Prudential Regular Savings Fund as on 31 Dec 21
Asset Allocation
Asset Class Value Cash 19.04% Equity 3.59% Debt 77.37% Debt Sector Allocation
Sector Value Corporate 68.41% Cash Equivalent 19.04% Government 8.65% Securitized 0.31% Credit Quality
Rating Value A 8.35% AA 72.8% AAA 17.96% BB 0.88% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.67% Govt Stock 2035
Sovereign Bonds | -5% ₹428 Cr 44,192,530
↑ 9,144,900 Prestige Estates Projects Limited
Debentures | -3% ₹257 Cr 2,500 Nayara Energy Limited
Debentures | -3% ₹249 Cr 2,500 6.1% Govt Stock 2031
Sovereign Bonds | -3% ₹227 Cr 23,500,000 Aditya Birla Fashion and Retail Limited
Debentures | -3% ₹215 Cr 1,750 Embassy Office Parks Reit
-, Since 31 Jul 20 | -2% ₹206 Cr 5,728,893 Ongc Petro Additions Limited
Debentures | -2% ₹200 Cr 2,000 The Great Eastern Shipping Company Limited
Debentures | -2% ₹177 Cr 1,743 JM Financial Credit Solutions Limited
Debentures | -2% ₹176 Cr 1,750 Mahindra Rural Housing Finance Limited
Debentures | -2% ₹153 Cr 1,500 3. Axis Credit Risk Fund
CAGR/Annualized return of 7.4% since its launch. Ranked 4 in Credit Risk category. Return for 2021 was 6% , 2020 was 8.2% and 2019 was 4.4% . Axis Credit Risk Fund
Growth Launch Date 15 Jul 14 NAV (25 Jan 22) ₹17.0666 ↑ 0.00 (0.02 %) Net Assets (Cr) ₹754 on 15 Jan 22 Category Debt - Credit Risk AMC Axis Asset Management Company Limited Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 1.66 Sharpe Ratio 2.81 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 6.59% Effective Maturity 2 Years 11 Days Modified Duration 1 Year 6 Months 14 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 16 ₹10,000 31 Dec 17 ₹10,643 31 Dec 18 ₹11,270 31 Dec 19 ₹11,761 31 Dec 20 ₹12,726 31 Dec 21 ₹13,487 Returns for Axis Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 25 Jan 22 Duration Returns 1 Month 0.4% 3 Month 1% 6 Month 2.5% 1 Year 5.9% 3 Year 6.1% 5 Year 6% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2021 6% 2020 8.2% 2019 4.4% 2018 5.9% 2017 6.4% 2016 9.8% 2015 8.7% 2014 2013 2012 Fund Manager information for Axis Credit Risk Fund
Name Since Tenure Devang Shah 15 Jul 14 7.47 Yr. Akhil Thakker 9 Nov 21 0.14 Yr. Data below for Axis Credit Risk Fund as on 15 Jan 22
Asset Allocation
Asset Class Value Cash 15.3% Debt 84.7% Debt Sector Allocation
Sector Value Corporate 73.37% Cash Equivalent 15.3% Government 9.42% Securitized 1.9% Credit Quality
Rating Value A 8.27% AA 58.94% AAA 32.78% Top Securities Holdings / Portfolio
Name Holding Value Quantity Telesonic Networks Limited
Debentures | -5% ₹35 Cr 350 6.79% Govt Stock 2027
Sovereign Bonds | -4% ₹31 Cr 3,000,000 Aditya Birla Fashion and Retail Limited
Debentures | -4% ₹31 Cr 250 Bahadur Chand Investments Private Limited
Debentures | -4% ₹30 Cr 300 Nirma Limited
Debentures | -3% ₹25 Cr 250 Flometallic India Private Limited
Debentures | -3% ₹25 Cr 250 Narmada Wind Energy Private Limited
Debentures | -3% ₹23 Cr 266 Sepset Constructions Limited
Debentures | -3% ₹20 Cr 210 Godrej Industries Limited
Debentures | -3% ₹20 Cr 200 Prestige Projects Private Limited
Debentures | -3% ₹20 Cr 200
↑ 200 4. Aditya Birla Sun Life Credit Risk Fund
CAGR/Annualized return of 7.2% since its launch. Return for 2021 was 6.4% , 2020 was 9.4% and 2019 was 2.1% . Aditya Birla Sun Life Credit Risk Fund
Growth Launch Date 17 Apr 15 NAV (25 Jan 22) ₹16.0664 ↑ 0.00 (0.02 %) Net Assets (Cr) ₹1,403 on 31 Dec 21 Category Debt - Credit Risk AMC Birla Sun Life Asset Management Co Ltd Rating Risk Moderate Expense Ratio 1.81 Sharpe Ratio 3.19 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 6.5% Effective Maturity 2 Years 7 Months 10 Days Modified Duration 1 Year 10 Months 28 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 16 ₹10,000 31 Dec 17 ₹10,809 31 Dec 18 ₹11,522 31 Dec 19 ₹11,763 31 Dec 20 ₹12,864 31 Dec 21 ₹13,682 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 25 Jan 22 Duration Returns 1 Month 0.3% 3 Month 1% 6 Month 2.4% 1 Year 6.3% 3 Year 5.9% 5 Year 6.3% 10 Year 15 Year Since launch 7.2% Historical performance (Yearly) on absolute basis
Year Returns 2021 6.4% 2020 9.4% 2019 2.1% 2018 6.6% 2017 8.1% 2016 10.3% 2015 2014 2013 2012 Fund Manager information for Aditya Birla Sun Life Credit Risk Fund
Name Since Tenure Sunaina Cunha 17 Apr 15 6.72 Yr. Mohit Sharma 6 Aug 20 1.41 Yr. Data below for Aditya Birla Sun Life Credit Risk Fund as on 31 Dec 21
Asset Allocation
Asset Class Value Cash 6.08% Equity 0.37% Debt 93.54% Debt Sector Allocation
Sector Value Corporate 75.59% Government 17.96% Cash Equivalent 6.08% Credit Quality
Rating Value A 6.86% AA 57.59% AAA 33.52% Below B 2.04% Top Securities Holdings / Portfolio
Name Holding Value Quantity Shriram City Union Finance Limited
Debentures | -7% ₹103 Cr 1,000 8.35% Govt Stock 2022
Sovereign Bonds | -5% ₹76 Cr 7,500,000 Indusind Bank Limited
Debentures | -4% ₹63 Cr 610 6.1% Govt Stock 2031
Sovereign Bonds | -3% ₹43 Cr 4,500,000 Bharti Hexacom Limited
Debentures | -3% ₹43 Cr 430 Steel Authority Of India Limited
Debentures | -3% ₹42 Cr 400 Tata Realty And Infrastructure Limited
Debentures | -3% ₹42 Cr 420 Telesonic Networks Limited
Debentures | -3% ₹42 Cr 420 Sundew Properties Limited
Debentures | -3% ₹42 Cr 420 Tata Housing Development Company Limited
Debentures | -3% ₹41 Cr 350 5. UTI Credit Risk Fund
CAGR/Annualized return of 3.5% since its launch. Ranked 20 in Credit Risk category. Return for 2021 was 21.5% , 2020 was -27.8% and 2019 was -4.8% . UTI Credit Risk Fund
Growth Launch Date 19 Nov 12 NAV (25 Jan 22) ₹13.7589 ↑ 0.01 (0.07 %) Net Assets (Cr) ₹554 on 31 Dec 21 Category Debt - Credit Risk AMC UTI Asset Management Company Ltd Rating ☆☆ Risk Moderate Expense Ratio 0 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 Months and above(NIL) Yield to Maturity 6.28% Effective Maturity 3 Years Modified Duration 1 Year 6 Months 22 Days Growth of 10,000 investment over the years.
Date Value 31 Dec 16 ₹10,000 31 Dec 17 ₹10,690 31 Dec 18 ₹11,276 31 Dec 19 ₹10,736 31 Dec 20 ₹7,753 31 Dec 21 ₹9,418 UTI Credit Risk Fund SIP Returns
Returns for UTI Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 25 Jan 22 Duration Returns 1 Month 0.3% 3 Month 0.8% 6 Month 18.7% 1 Year 21.7% 3 Year -5.9% 5 Year -1.3% 10 Year 15 Year Since launch 3.5% Historical performance (Yearly) on absolute basis
Year Returns 2021 21.5% 2020 -27.8% 2019 -4.8% 2018 5.5% 2017 6.9% 2016 10.3% 2015 8.9% 2014 11.5% 2013 7.7% 2012 Fund Manager information for UTI Credit Risk Fund
Name Since Tenure Ritesh Nambiar 9 Nov 12 9.15 Yr. Data below for UTI Credit Risk Fund as on 31 Dec 21
Asset Allocation
Asset Class Value Cash 22.42% Debt 77.58% Debt Sector Allocation
Sector Value Corporate 54.7% Government 22.88% Cash Equivalent 22.42% Credit Quality
Rating Value A 7.3% AA 59.9% AAA 32.8% Top Securities Holdings / Portfolio
Name Holding Value Quantity Piramal Capital & Housing Finance Limited
Debentures | -7% ₹40 Cr 480,554 National Bank For Agriculture And Rural Development
Debentures | -5% ₹25 Cr 250 Summit Digitel Infrastructure Private Limited
Debentures | -5% ₹25 Cr 250 4.68% Govt Stock 2034
Sovereign Bonds | -4% ₹24 Cr 250,000,000 India Grid TRust
Debentures | -4% ₹21 Cr 210 The Tata Power Company Limited
Debentures | -4% ₹21 Cr 200 Torrent Power Limited
Debentures | -4% ₹20 Cr 20 Amba River Coke Limited
Debentures | -4% ₹20 Cr 201 Vedanta Limited
Debentures | -4% ₹20 Cr 200 Aadhar Housing Finance Limited
Debentures | -4% ₹20 Cr 200 6. SBI Credit Risk Fund
CAGR/Annualized return of 7.6% since its launch. Ranked 3 in Credit Risk category. Return for 2021 was 5% , 2020 was 9.8% and 2019 was 6.5% . SBI Credit Risk Fund
Growth Launch Date 19 Jul 04 NAV (25 Jan 22) ₹35.863 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹3,289 on 31 Dec 21 Category Debt - Credit Risk AMC SBI Funds Management Private Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.55 Sharpe Ratio 1.29 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 500 Exit Load 0-12 Months (3%),12-24 Months (1.5%),24-36 Months (0.75%),36 Months and above(NIL) Yield to Maturity 6.18% Effective Maturity 2 Years 1 Month 24 Days Modified Duration 1 Year 9 Months Growth of 10,000 investment over the years.
Date Value 31 Dec 16 ₹10,000 31 Dec 17 ₹10,689 31 Dec 18 ₹11,350 31 Dec 19 ₹12,089 31 Dec 20 ₹13,270 31 Dec 21 ₹13,928 Returns for SBI Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 25 Jan 22 Duration Returns 1 Month 0.4% 3 Month 0.8% 6 Month 2.4% 1 Year 5.2% 3 Year 6.9% 5 Year 6.7% 10 Year 15 Year Since launch 7.6% Historical performance (Yearly) on absolute basis
Year Returns 2021 5% 2020 9.8% 2019 6.5% 2018 6.2% 2017 6.9% 2016 10.5% 2015 9.7% 2014 10.6% 2013 10.1% 2012 9.8% Fund Manager information for SBI Credit Risk Fund
Name Since Tenure Lokesh Mallya 1 Feb 17 4.92 Yr. Data below for SBI Credit Risk Fund as on 31 Dec 21
Asset Allocation
Asset Class Value Cash 26.75% Debt 73.25% Debt Sector Allocation
Sector Value Corporate 51.91% Cash Equivalent 25.85% Government 22.24% Credit Quality
Rating Value A 8.42% AA 52.79% AAA 38.8% Top Securities Holdings / Portfolio
Name Holding Value Quantity 5.63% Govt Stock 2026
Sovereign Bonds | -13% ₹411 Cr 41,500,000 Indinfravit Trust
Debentures | -5% ₹151 Cr 1,500 TATA International Limited
Debentures | -5% ₹151 Cr 1,500 Tmf Holdings Limited
Debentures | -4% ₹116 Cr 900 TATA Projects Limited
Debentures | -3% ₹113 Cr 1,100 Aadhar Housing Finance Limited
Debentures | -3% ₹104 Cr 1,000 Coastal Gujarat Power Limited
Debentures | -3% ₹104 Cr 1,000 Mahindra Rural Housing Finance Limited
Debentures | -3% ₹102 Cr 1,000 Flometallic India Private Limited
Debentures | -3% ₹95 Cr 950 Avanse Financial Services Limited
Debentures | -3% ₹95 Cr 950
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.
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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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