Invest in Best Debt Mutual Funds in India 2024
Explore the best debt mutual funds in India for 2024. Learn how these funds can help you achieve secure and steady returns while preserving capital.
What is Debt Mutual Funds?
Debt mutual funds are investment vehicles that invest in fixed-income securities like bonds, treasury bills, and corporate debt. They aim to provide regular income and capital preservation with lower risk compared to equity funds. Types include liquid funds, short-term funds, and gilt funds. These funds are suitable for conservative investors seeking steady returns and portfolio diversification. While they offer stability, they still carry risks such as interest rate risk and credit risk.
Features of a Debt Mutual Fund
- Debt Mutual Funds have a fixed maturity period.
- Debt Funds have the lowest risk.
- Debt Funds have low capital appreciation.
Best Performing Debt Mutual Funds – 2024
| Fund Name | Category | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) |
|---|---|---|---|---|
| HDFC Corporate Bond Fund | Corporate Bond | 7.15% | 7.35% | 7.10% |
| ICICI Prudential Corporate Bond Fund | Corporate Bond | 7.10% | 7.25% | 7.00% |
| SBI Magnum Gilt Fund | Gilt Fund | 8.00% | 8.50% | 8.25% |
| Franklin India Low Duration Fund | Low Duration | 6.80% | 7.00% | 6.90% |
| Aditya Birla Sun Life Corporate Bond | Corporate Bond | 7.20% | 7.40% | 7.15% |
| Axis Treasury Advantage Fund | Treasury Fund | 6.90% | 7.05% | 6.85% |
| UTI Gilt Fund | Gilt Fund | 7.50% | 7.70% | 7.60% |
| Kotak Bond Fund | Bond Fund | 7.05% | 7.25% | 7.00% |
| Nippon India Short Term Fund | Short Term Fund | 6.75% | 7.00% | 6.80% |
| DSP BlackRock Corporate Bond Fund | Corporate Bond | 7.30% | 7.50% | 7.20% |
Advantages of Investing in Debt Mutual Funds
- Stable Returns: Debt mutual funds generally offer more stable returns compared to equity funds, making them suitable for conservative investors.
- Diversification: Investing in a variety of debt instruments, these funds reduce the risk associated with investing in a single security.
- Professional Management: Managed by expert fund managers who select the best debt instruments to maximize returns and manage risks.
- Liquidity: Easier to buy and sell compared to direct investments in bonds, providing better liquidity.
- Tax Efficiency: Long-term capital gains (holding period of more than three years) benefit from indexation, reducing the tax burden.
- Regular Income: Provides a steady stream of income, ideal for retirees or those seeking regular payouts.
- Lower Risk: Generally lower risk than equity funds, as they primarily invest in fixed-income securities.
- Capital Preservation: Focuses on preserving the invested capital while providing moderate returns.
- Flexibility: Various types of debt funds cater to different investment horizons and risk appetites, from liquid funds to long-term income funds.
Benefits of Debt Mutual Funds
Fixed returns
As the investments are made in fixed income securities, returns are usually guaranteed. However, one cannot rule out the possibility of the debt fund not performing to the expected level because of factors such as the low credit rating of securities.
Better returns
Comparing conventional investments such as savings accounts and fixed deposits, Debt Mutual Funds provide a better return. The instant redemption facility of Debt Mutual Funds makes it a comparable option to traditional investments.
Diversified portfolios
Investing in a diversified portfolio is essential to mitigate risks. It is better to invest in Debt Mutual Funds that invest in diverse instruments instead of pumping your entire money into a single security.
Liquidity
Liquid Funds are a type of Debt Mutual Fund that gives optimal returns over a short term. You can redeem the units any time based on your requirement.
Who should invest in Debt Mutual Funds?
- People who are risk-averse on big investments can opt for Debt Mutual Funds to get decent returns.
- If you are a conservative investor who worries about the performance of equity funds, you can opt for Debt Mutual Funds. It ensures that your money is invested in safe financial instruments with decent returns on maturity.
- If you are looking for an alternative investment method to fixed deposits, debt funds may be your best bet. Unlike Fixed Deposits, debt funds have no lock-in period.
How to Choose the best Debt Mutual Fund?
Financial Goal
Before investing in a fund, it’s good to have an idea about your financial goals. You must have clear expectations about the returns of the fund. It will help you choose the most appropriate fund suited to your goals.
Fund History
You must get an idea about the history of the investment vehicle that you’ve chosen before proceeding with it. Understanding the past performance of the debt fund will give you an idea about the fund’s historical returns.
Taxability
Taxation depends on the holding period. If you redeem your Debt Mutual Fund units before the completing of the three years, then Short-term Capital Gains Tax is levied.
The reputation of AMC
The Asset Management Company or AMC is the company that operates the funds. Choose an AMC that has a reputation of being a good performer over the years to ensure the safety of your investment.
Asset Allocation
You must have a thorough knowledge of the fund you plan to invest in to help you manage the fund more confidently.
Exit Load
Educate yourself about the exit load on the fund, which will apply if you exit before the lock-in, if any.
How to Invest in Debt Mutual Funds at Fincover?
- Log in to Fincover
- Select “Investments” -> “Mutual Funds” and click on “Debt Mutual Fund”
- Enter the details and compare funds from different AMCs
- You can select the fund that suits your financial goals and proceed to make the purchase