Contents
- Overview
- Advantages of debt funds
- Returns
- Rupee cost averaging
- Liquidity
- Lower taxes
- Best debt funds schemes
- Axis liquid fund (best debt funds)
- Indiabulls liquid fund (best debt funds)
- Franklin India low duration funds (best debt funds)
- ICICI Prudential long term plan (best debt funds)
- Kotak Money market scheme
- Franklin India Ultra-short bond fund
- HDFC short term fund
- Aditya Birla Sun Life Corporate Bond fund
Overview
Debt mutual funds are the type of mutual funds that invests in debt securities like government securities, treasury bills, money market instruments, corporate bonds and other debt securities of different times periods as per the convenience of the investor.
In this, the amount is invested in a scheme that comes with a maturity date and a fixed rate of interest.
Many agencies provide ratings to these funds based on the performance of the fund. These agencies are CRISIL, CARE, FITCH, Brickwork, and ICRA.
These ratings seem simple but are not simple. As the money is invested in securities which are tradable like stocks.
Advantages of debt funds
Returns
Almost all of the debt funds promise to pay the returns of 7-8% to the investors on a regular basis. On the other hand, if you invest your money in bank recurring deposits, you’d be getting the return of around 5-7%. Taking into account the risk factor of both the options available, shouldn’t it be advisable to invest in a scheme that provides a much better return?
Rupee cost averaging
Rupee cost averaging is all about regular investments. When regular investments are made irrespective of the market conditions, the investor gets more units when the market is not performing and he/she gets fewer units when the market is booming. So, the total cost of the investment averages out.
Liquidity
Compared to other options available in the market, debt funds provide more liquidity. Consider, bank fixed deposits which are recurring in nature, but if the money is withdrawn before the time mentioned, then there would be a penalty for it. That’s not the case of debt funds. If the money is invested in debt funds, using the SIP option, then the amount can be withdrawn anytime without any penalty incurred.
Lower taxes
In the case of debt funds, the tax is charged with the same rate as in the case of fixed deposits for up to 3 years. But after this period, the tax is charged significantly lower than recurring deposits. It is about 10% without indexation plus 3% cess. Learn how to plan your taxes: types & objectives in mutual funds.
And in the case of the fixed deposits, the tax is charged the same way as before, which depends on your income bracket. Must read on Tax benefits on investing in mutual funds
Best debt funds schemes
| Fund name | 1 yr | 3 yr | 5 yr | Expense ratio | Category | Risk |
|---|---|---|---|---|---|---|
| Axis liquid fund direct growth | 7.61% | 7.23% | 7.77% | 0.11% | Debt (Liquid) | Low |
| Indiabulls liquid funds direct growth | 7.51% | 7.26% | 7.84% | 0.1% | Debt (Liquid) | Low |
| Franklin India Low duration fund direct growth | 9.23% | 9.15% | 9.46% | 0.4% | Debt (low duration) | Moderate |
| ICICI Prudential All seasons Bond fund direct growth | 8.53% | 9.21% | 10.67% | 0.6% | Debt (dynamic) | Moderate |
| Kotak MF money market scheme direct growth | 8.28% | 7.43% | 7.91% | 0.16% | Debt (money market) | Low |
| Franklin India Ultra-short bond fund- super international plan-direct growth | 9.64% | 8.96% | 9.29% | 0.35% | Debt (ultra-short duration) | Moderate |
| HDFCMF short term debt fund- direct growth | 8.31% | 7.65% | 8.36% | 0.25% | Debt (short duration) | Moderately low |
| Aditya Birla sun life corporate bond fund- direct growth | 8.91% | 7.93% | 8.68% | 0.27% | Debt (corporate bonds) | Moderately low |
Axis liquid fund (best debt funds)
It is one of the top performing debt funds schemes in the market as of now. Consistently over the last years, it has promised a return of 8% (approximately), which is higher than others.
| AUM (Fund size) | Rs. 28,010 crore |
|---|---|
| Minimum SIP | Not applicable |
| Minimum Lumpsum | Rs. 500 |
| Age of the fund | 10 years |
| Expense ratio | 0.11% |
| Type | Open-ended |
Indiabulls liquid fund (best debt funds)
Investing in this fund is also better than most of the schemes working in the market. The return is 8.25% over the last 5 years and 6.71% over the last year.
| AUM (Fund size) | Rs. 5,040 crore |
|---|---|
| Minimum SIP | Rs. 500 |
| Minimum Lumpsum | Rs. 500 |
| Age of the fund | 8 years |
| Expense ratio | 0.10% |
| Type | Open-ended |
Franklin India low duration funds (best debt funds)
The money invested in this scheme has given a very high return of 9.49% over the last 5 years and 8.20% over the last year.
| AUM (fund size ) | Rs. 6,875 crore |
|---|---|
| Minimum SIP | Rs. 500 |
| Minimum Lumpsum | Rs. 10,000 |
| Age of the fund | 6 years |
| Expense ratio | 0.40% |
| Type | Open-ended |
ICICI Prudential long term plan (best debt funds)
It is one of the best debt funds scheme as investing in this scheme has promised a return of 4.43% in the last year and a whopping 11.24% in the last 5 years.
| AUM (fund size) | Rs. 28,010 crore |
|---|---|
| Minimum SIP | Not applicable |
| Minimum Lumpsum | Rs. 500 |
| Age of the fund | 26 years |
| Expense ratio | 0.60% |
| Type | Open-ended |
Kotak Money market scheme
| AUM (Funds size ) | Rs. 6,736 crore |
|---|---|
| Minimum SIP | Not applicable |
| Minimum Lumpsum | Rs. 5,000 |
| Age of the fund | 21 years |
| Expense ratio | 0.16% |
| Type | Open-ended |
Franklin India Ultra-short bond fund
| AUM (fund size ) | Rs. 16,712 crore |
|---|---|
| Minimum SIP | Rs. 1,000 |
| Minimum Lumpsum | Rs. 5,000 |
| Age of the fund | 21 years |
| Expense ratio | 0.16% |
| Type | Open-ended |
HDFC short term fund
| AUM (Fund size) | Rs. 7,316 crore |
|---|---|
| Minimum SIP | Rs. 500 |
| Minimum Lumpsum | Rs. 5,000 |
| Age of the fund | 19 years |
| Expense ratio | 0.25% |
| Type | Open-ended |
Aditya Birla Sun Life Corporate Bond fund
| AUM (Fund size) | Rs. 15,134 crore |
|---|---|
| Minimum SIP | Rs. 100 |
| Minimum Lumpsum | Rs. 100 |
| Age of the fund | 25 years |
| Expense ratio | 0.27% |
| Type | Open-ended |
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