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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 ICICI Prudential Regular Savings Fund Growth ₹24.5061
↑ 0.01 ₹7,926 10,000 1.6 4.3 8 8.9 9.8 7.05% 1Y 11M 19D 2Y 8M 23D Nippon India Credit Risk Fund Growth ₹27.0879
↑ 0.00 ₹990 500 8.1 10.4 15.6 3.2 -5.9 6.79% 1Y 11M 16D 2Y 7M 2D HDFC Credit Risk Debt Fund Growth ₹19.0526
↑ 0.00 ₹8,311 5,000 2.1 5.1 10.1 9.4 10.9 6.67% 2Y 3M 11D 2Y 11M 12D Aditya Birla Sun Life Credit Risk Fund Growth ₹15.8657
↑ 0.00 ₹1,467 1,000 1.7 3.8 8.7 6.4 9.4 6.31% 1Y 10M 2D 2Y 7M 24D Axis Credit Risk Fund Growth ₹16.8567
↑ 0.00 ₹724 5,000 1.8 3.9 7.6 6.7 8.2 6.21% 1Y 5M 16D 2Y 22D SBI Credit Risk Fund Growth ₹35.4847
↑ 0.00 ₹3,440 5,000 1.8 4 7.3 7.7 9.8 6.19% 1Y 11M 1D 2Y 4M 10D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 22 Sep 21
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 Regular Savings Fund - Debt Plan) The primary investment objective of this option is to generate optimal returns consistent with moderate level of risk. This income may be complemented by capital appreciation of the portfolio. Accordingly investments shall predominantly be made in Debt & Money Market Instruments. Nippon India Credit Risk Fund is a Debt - Credit Risk fund was launched on 8 Jun 05. It is a fund with Moderate risk and has given a Below is the key information for Nippon India Credit Risk Fund Returns up to 1 year are on (Erstwhile HDFC Corporate Debt Opportunities Fund) To generate regular income and capital appreciation by investing predominantly in corporate debt. HDFC Credit Risk Debt Fund is a Debt - Credit Risk fund was launched on 25 Mar 14. It is a fund with Moderate risk and has given a Below is the key information for HDFC Credit Risk Debt Fund Returns up to 1 year are on (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 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 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. 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 (22 Sep 21) ₹24.5061 ↑ 0.01 (0.04 %) Net Assets (Cr) ₹7,926 on 31 Aug 21 Category Debt - Credit Risk AMC ICICI Prudential Asset Management Company Limited Rating ☆ Risk Moderate Expense Ratio 1.6 Sharpe Ratio 3.96 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 7.05% Effective Maturity 2 Years 8 Months 23 Days Modified Duration 1 Year 11 Months 19 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 16 ₹10,000 31 Aug 17 ₹10,880 31 Aug 18 ₹11,478 31 Aug 19 ₹12,411 31 Aug 20 ₹13,608 31 Aug 21 ₹14,761 Returns for ICICI Prudential Regular Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Sep 21 Duration Returns 1 Month 0.6% 3 Month 1.6% 6 Month 4.3% 1 Year 8% 3 Year 8.9% 5 Year 8% 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 4.73 Yr. Akhil Kakkar 3 Jun 17 4.16 Yr. Data below for ICICI Prudential Regular Savings Fund as on 31 Aug 21
Asset Allocation
Asset Class Value Cash 14.28% Equity 3.51% Debt 82.21% Debt Sector Allocation
Sector Value Corporate 72.94% Cash Equivalent 14.28% Government 8.95% Securitized 0.33% Credit Quality
Rating Value A 11.86% AA 67.56% AAA 19.29% B 0.09% BBB 1.19% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.64% Govt Stock 2035
Sovereign Bonds | -5% ₹418 Cr 42,595,050 Prestige Estates Projects Limited
Debentures | -3% ₹249 Cr 2,500 Nayara Energy Limited
Debentures | -3% ₹249 Cr 2,500
↑ 2,500 Aditya Birla Fashion and Retail Limited
Debentures | -3% ₹211 Cr 1,750 ONGC Petro Additions Limited
Debentures | -3% ₹200 Cr 2,000 TMF Holdings Limited
Debentures | -2% ₹187 Cr 1,500 182 DTB 19082021
Sovereign Bonds | -2% ₹185 Cr 18,500,000 The Great Eastern Shipping Company Limited
Debentures | -2% ₹178 Cr 1,743 JM Financial Credit Solutions Limited
Debentures | -2% ₹172 Cr 1,750 Embassy Office Parks Reit
-, Since 31 Jul 20 | -2% ₹171 Cr 4,846,800 2. Nippon India Credit Risk Fund
CAGR/Annualized return of 6.3% 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 (22 Sep 21) ₹27.0879 ↑ 0.00 (0.02 %) Net Assets (Cr) ₹990 on 31 Aug 21 Category Debt - Credit Risk AMC Nippon Life Asset Management Ltd. Rating ☆☆ Risk Moderate Expense Ratio 1.82 Sharpe Ratio 1.89 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 6.79% Effective Maturity 2 Years 7 Months 2 Days Modified Duration 1 Year 11 Months 16 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 16 ₹10,000 31 Aug 17 ₹10,868 31 Aug 18 ₹11,441 31 Aug 19 ₹11,780 31 Aug 20 ₹10,798 31 Aug 21 ₹12,498 Returns for Nippon India Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Sep 21 Duration Returns 1 Month 0.7% 3 Month 8.1% 6 Month 10.4% 1 Year 15.6% 3 Year 3.2% 5 Year 4.5% 10 Year 15 Year Since launch 6.3% 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 Kinjal Desai 25 May 18 3.19 Yr. Sushil Budhia 1 Feb 20 1.5 Yr. Data below for Nippon India Credit Risk Fund as on 31 Aug 21
Asset Allocation
Asset Class Value Cash 29.25% Debt 70.75% Debt Sector Allocation
Sector Value Corporate 53.07% Cash Equivalent 29.25% Government 10.16% Securitized 7.53% Credit Quality
Rating Value A 10.29% AA 52.02% AAA 37.69% Below B 0% Top Securities Holdings / Portfolio
Name Holding Value Quantity INNOVATION TRUST XXX
Unlisted bonds | -6% ₹58 Cr 187 Tata Realty And Infrastructure Limited
Debentures | -5% ₹50 Cr 500 8.33% Govt Stock 2026
Sovereign Bonds | -4% ₹44 Cr 4,000,000 L&T Metro Rail (Hyderabad) Limited
Debentures | -4% ₹44 Cr 400 Bharti Hexacom Limited
Debentures | -4% ₹40 Cr 400 Piramal Capital & Housing Finance Limited
Debentures | -4% ₹36 Cr 450 U.P. Power Corporation Limited
Debentures | -4% ₹36 Cr 350 JSW Steel Limited
Debentures | -4% ₹36 Cr 350 Summit Digitel Infrastructure Private Limited
Debentures | -3% ₹35 Cr 350 Asirvad Micro Finance Limited
Debentures | -3% ₹30 Cr 300 3. HDFC Credit Risk Debt Fund
CAGR/Annualized return of 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 (22 Sep 21) ₹19.0526 ↑ 0.00 (0.02 %) Net Assets (Cr) ₹8,311 on 31 Aug 21 Category Debt - Credit Risk AMC HDFC Asset Management Company Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.55 Sharpe Ratio 3.65 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 6.67% Effective Maturity 2 Years 11 Months 12 Days Modified Duration 2 Years 3 Months 11 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 16 ₹10,000 31 Aug 17 ₹10,902 31 Aug 18 ₹11,316 31 Aug 19 ₹12,233 31 Aug 20 ₹13,341 31 Aug 21 ₹14,707 Returns for HDFC Credit Risk Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Sep 21 Duration Returns 1 Month 0.7% 3 Month 2.1% 6 Month 5.1% 1 Year 10.1% 3 Year 9.4% 5 Year 8% 10 Year 15 Year Since launch 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 7.36 Yr. Sankalp Baid 22 Jan 21 0.52 Yr. Data below for HDFC Credit Risk Debt Fund as on 31 Aug 21
Asset Allocation
Asset Class Value Cash 17.16% Equity 1.6% Debt 81.25% Debt Sector Allocation
Sector Value Corporate 58.34% Government 22.91% Cash Equivalent 17.16% Credit Quality
Rating Value A 5.14% AA 58.62% AAA 36.24% Top Securities Holdings / Portfolio
Name Holding Value Quantity Bharti Hexacom Limited
Debentures | -4% ₹360 Cr 3,600 Indinfravit Trust
Unlisted bonds | -4% ₹360 Cr 3,500 Pipeline Infrastructure Private Limited
Debentures | -4% ₹345 Cr 3,200 Power Finance Corporation Limited
Debentures | -4% ₹310 Cr 2,790 Shriram - City Union Finance Limited
Debentures | -3% ₹283 Cr 28,000 Punjab National Bank
Debentures | -3% ₹246 Cr 2,425 Vedanta Limited
Debentures | -3% ₹233 Cr 2,327 Coastal Gujarat Power Limited
Debentures | -3% ₹229 Cr 2,030 Green Infra Wind Energy Limited
Debentures | -3% ₹226 Cr 2,350 Tata Motors Limited
Debentures | -3% ₹210 Cr 2,000 4. Aditya Birla Sun Life Credit Risk Fund
CAGR/Annualized return of 7.4% since its launch. Return for 2020 was 9.4% , 2019 was 2.1% and 2018 was 6.6% . Aditya Birla Sun Life Credit Risk Fund
Growth Launch Date 17 Apr 15 NAV (22 Sep 21) ₹15.8657 ↑ 0.00 (0.02 %) Net Assets (Cr) ₹1,467 on 31 Aug 21 Category Debt - Credit Risk AMC Birla Sun Life Asset Management Co Ltd Rating Risk Moderate Expense Ratio 1.81 Sharpe Ratio 4.64 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 6.31% Effective Maturity 2 Years 7 Months 24 Days Modified Duration 1 Year 10 Months 2 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 16 ₹10,000 31 Aug 17 ₹11,038 31 Aug 18 ₹11,661 31 Aug 19 ₹12,364 31 Aug 20 ₹12,749 31 Aug 21 ₹13,915 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 22 Sep 21 Duration Returns 1 Month 0.7% 3 Month 1.7% 6 Month 3.8% 1 Year 8.7% 3 Year 6.4% 5 Year 6.8% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2020 9.4% 2019 2.1% 2018 6.6% 2017 8.1% 2016 10.3% 2015 2014 2013 2012 2011 Fund Manager information for Aditya Birla Sun Life Credit Risk Fund
Name Since Tenure Sunaina Cunha 1 Apr 17 4.33 Yr. Mohit Sharma 6 Aug 20 0.98 Yr. Data below for Aditya Birla Sun Life Credit Risk Fund as on 31 Aug 21
Asset Allocation
Asset Class Value Cash 11.86% Equity 0.35% Debt 87.78% Debt Sector Allocation
Sector Value Corporate 74.56% Government 13.23% Cash Equivalent 11.86% Credit Quality
Rating Value A 7.41% AA 60.18% AAA 30.28% Below B 2.13% Top Securities Holdings / Portfolio
Name Holding Value Quantity Shriram - City Union Finance Limited
Debentures | -7% ₹102 Cr 1,000 8.35% Govt Stock 2022
Sovereign Bonds | -5% ₹78 Cr 7,500,000 Indusind Bank Limited
Debentures | -5% ₹71 Cr 700
↑ 700 Tata Realty And Infrastructure Limited
Debentures | -3% ₹42 Cr 420 Steel Authority of India Limited
Debentures | -3% ₹42 Cr 400 Telesonic Networks Limited
Debentures | -3% ₹42 Cr 420
↑ 420 Tata Housing Development Company Limited
Debentures | -3% ₹41 Cr 350 JM Financial Credit Solutions Limited
Debentures | -3% ₹37 Cr 370
↑ 370 Tata Realty and Infrastructure Limited
Debentures | -2% ₹36 Cr 350 LIC Housing Finance Limited
Debentures | -2% ₹36 Cr 350 5. Axis Credit Risk Fund
CAGR/Annualized return of 7.5% since its launch. Ranked 4 in Credit Risk category. Return for 2020 was 8.2% , 2019 was 4.4% and 2018 was 5.9% . Axis Credit Risk Fund
Growth Launch Date 15 Jul 14 NAV (22 Sep 21) ₹16.8567 ↑ 0.00 (0.00 %) Net Assets (Cr) ₹724 on 31 Aug 21 Category Debt - Credit Risk AMC Axis Asset Management Company Limited Rating ☆☆☆☆☆ Risk Moderate Expense Ratio 1.66 Sharpe Ratio 4.86 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 6.21% Effective Maturity 2 Years 22 Days Modified Duration 1 Year 5 Months 16 Days Growth of 10,000 investment over the years.
Date Value 31 Aug 16 ₹10,000 31 Aug 17 ₹10,851 31 Aug 18 ₹11,345 31 Aug 19 ₹11,803 31 Aug 20 ₹12,718 31 Aug 21 ₹13,720 Returns for Axis Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Sep 21 Duration Returns 1 Month 0.5% 3 Month 1.8% 6 Month 3.9% 1 Year 7.6% 3 Year 6.7% 5 Year 6.5% 10 Year 15 Year Since launch 7.5% Historical performance (Yearly) on absolute basis
Year Returns 2020 8.2% 2019 4.4% 2018 5.9% 2017 6.4% 2016 9.8% 2015 8.7% 2014 2013 2012 2011 Fund Manager information for Axis Credit Risk Fund
Name Since Tenure Devang Shah 15 Jul 14 7.05 Yr. Data below for Axis Credit Risk Fund as on 31 Aug 21
Asset Allocation
Asset Class Value Cash 15.46% Debt 84.54% Debt Sector Allocation
Sector Value Corporate 70.69% Cash Equivalent 15.46% Government 8.64% Securitized 5.21% Credit Quality
Rating Value A 9.97% AA 60.07% AAA 29.96% Top Securities Holdings / Portfolio
Name Holding Value Quantity Telesonic Networks Limited
Debentures | -5% ₹35 Cr 350
↑ 350 Tata Steel Limited
Debentures | -4% ₹31 Cr 170 Bahadur Chand Investments Private Limited
Debentures | -4% ₹30 Cr 300 India Grid Trust
Debentures | -4% ₹26 Cr 250 Godrej Properties Limited
Debentures | -4% ₹26 Cr 250 Flometallic India Private Limited
Debentures | -4% ₹25 Cr 250 Nirma Limited
Debentures | -3% ₹25 Cr 250 Narmada Wind Energy Private Limited
Debentures | -3% ₹23 Cr 266 Embassy Office Parks Reit
Debentures | -3% ₹21 Cr 170 Sepset Constructions Limited
Debentures | -3% ₹21 Cr 210 6. SBI Credit Risk Fund
CAGR/Annualized return of 7.6% since its launch. Ranked 3 in Credit Risk category. Return for 2020 was 9.8% , 2019 was 6.5% and 2018 was 6.2% . SBI Credit Risk Fund
Growth Launch Date 19 Jul 04 NAV (22 Sep 21) ₹35.4847 ↑ 0.00 (0.00 %) Net Assets (Cr) ₹3,440 on 31 Aug 21 Category Debt - Credit Risk AMC SBI Funds Management Private Limited Rating ☆☆☆☆ Risk Moderate Expense Ratio 1.55 Sharpe Ratio 2.59 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 6.19% Effective Maturity 2 Years 4 Months 10 Days Modified Duration 1 Year 11 Months 1 Day Growth of 10,000 investment over the years.
Date Value 31 Aug 16 ₹10,000 31 Aug 17 ₹10,890 31 Aug 18 ₹11,399 31 Aug 19 ₹12,168 31 Aug 20 ₹13,164 31 Aug 21 ₹14,161 Returns for SBI Credit Risk Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 22 Sep 21 Duration Returns 1 Month 0.6% 3 Month 1.8% 6 Month 4% 1 Year 7.3% 3 Year 7.7% 5 Year 7.1% 10 Year 15 Year Since launch 7.6% Historical performance (Yearly) on absolute basis
Year Returns 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% 2011 9.4% Fund Manager information for SBI Credit Risk Fund
Name Since Tenure Lokesh Mallya 1 Feb 17 4.5 Yr. Data below for SBI Credit Risk Fund as on 31 Aug 21
Asset Allocation
Asset Class Value Cash 15% Debt 85% Debt Sector Allocation
Sector Value Corporate 68.81% Government 19.87% Cash Equivalent 11.32% Credit Quality
Rating Value A 4.65% AA 57.4% AAA 37.95% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.18% Govt Stock 2024
Sovereign Bonds | -6% ₹207 Cr 20,000,000 7.27% Govt Stock 2026
Sovereign Bonds | -5% ₹159 Cr 15,000,000 Indinfravit Trust
Debentures | -4% ₹154 Cr 1,500 Tata International Limited
Debentures | -4% ₹152 Cr 1,500 06.72 KL SDL 2027
Sovereign Bonds | -4% ₹126 Cr 12,500,000 Tata Projects Limited
Debentures | -3% ₹114 Cr 1,100 TMF Holdings Limited
Debentures | -3% ₹112 Cr 900 Coastal Gujarat Power Limited
Debentures | -3% ₹105 Cr 1,000 DHFL Vysya Housing Finance Limited
Debentures | -3% ₹105 Cr 1,000 Mahindra Rural Housing Finance Limited
Debentures | -3% ₹102 Cr 1,000
Smart Tips to Look for in Debt Funds
1. Yield
The yield is a measure of the interest Income generated by the Bonds in the portfolio.
For instance, let's assume that a bond has a Face Value of INR 100 with an 8 percent coupon rate. This means that the investor will earn INR 8 p.a., on each bond that he invests in. As the bonds are traded in the open market, the price will fluctuate each Business Day. The interest rates rise and fall and demand for the bonds moves up and down. And this impacts the price of the bond. Let’s assume interest rates rise to 10 percent. Even then the investor will continue to earn INR 8. So to increase the yield to 10 percent, which is the current market rate of interest, the price of the bond will have to drop to INR 80.
In another instance, lets assume that the interest rates fall to 6 percent. Again, the investor will continue to earn INR 8. This time the price of the bond will have to go up to INR 133.
If we look at these assumptions, there are two aspects to it- the one is that the yield is not fixed, but fluctuates to changes in the interest rate. The second one is the price of the bond moves inversely to interest rates. It moves to maintain a level where it will attract buyers.
2. Yield to Maturity
The yield to maturity(ytm) of a debt mutual fund indicates the running yield of the fund. When comparing debt funds on the Basis of YTM, one should also look at that fact that how is the extra yield being generated. Is this at the cost of as lower portfolio quality? Investing in not so good quality instruments has its own issues. You don't want to end up investing in a Debt fund which has such bonds or securities that may Default later on. So, always look at the portfolio yield and balance it off with the credit quality.
3. Modified Duration
Modified duration provides a fair indication of a bond’s sensitivity to a change in interest rates. The higher the duration, the more volatility the bond exhibits with a change in interest rates
4. Credit Quality of Portfolio
In order to invest in Best Debt Funds, checking the credit quality of the bonds and debt securities is an essential parameter. Bonds are assigned a credit rating by various agencies based on their ability to pay the money back. A bond with AAA rating is considered to be the best credit rating and also implies a safe and secure investment. If one truly wants safety and considers this as the paramount parameter in selecting the best debt fund, then getting into a fund with very high-quality debt instruments (AAA or AA+) may be the desired option.
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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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