The big difference is that debt funds offer a lot of flexibility and choice. Bank FDs are now giving just about 7-7.5% interest on their FDs. On the other hand debt funds will also benefit from falling interest rates as debt funds experience NAV appreciation when rates fall. This benefit is passed on to investors.
Top 10 Debt Mutual Funds
| Fund Name | Category | 1Y Returns |
|---|
| ICICI Prudential Credit Risk Fund | Debt | 9.8% |
| SBI Dynamic Bond Fund | Debt | 16.5% |
| ICICI Prudential Ultra Short Term Fund | Debt | 8.3% |
| Nippon India Gilt Securities Fund | Debt | 17.2% |
Debt funds that follow an accrual strategy have higher exit loads as this strategy calls for patience in investing. Franklin India Credit Risk Fund does not charge any exit load if you withdraw up to 10% of your units per year. Equity funds typically have an exit load that is valid till a year after you invest.
Top 10 Sbi Mutual Funds
| Fund Name | Category | Rating |
|---|
| SBI Magnum Midcap Fund | Equity | 1star |
| SBI Magnum Medium Duration Fund | Debt | 5star |
| SBI Debt Hybrid Fund | Hybrid | 3star |
| SBI Magnum Gilt Fund | Debt | 4star |
For a medium-term investor, debt funds like dynamic bond funds are ideal for riding the interest rate volatility. When compared to 5-year bank FDs, debt bond funds offer higher returns. If you are looking to earn a regular income from your investments, then Monthly Income Plans may are a good option.
Rule: Investments in debt funds are safe because they do not have exposure to volatile assets such as equity shares. Exception: When interest rates are rising, long-term debt funds can give negative returns. The funds holding bonds of long maturities suffered losses, with the average fund losing 7.26 per cent.
"Those with an investment horizon of two-three years should invest in long-duration gilt funds to gain from capital gains once interest rates ease off," says Ranu. Long maturity bonds are more prone to interest rate risk and hence have higher yields.
Debt funds do not have a lock-in period. You have the option to withdraw your money at any time.
Top Mutual Fund Schemes to Invest in FY 2018-19
- Mirae Asset Large Cap Reg-G. Invest Now.
- Motilal Oswal Multicap 35 Reg-G. Invest Now.
- SBI Magnum MultiCap-G. Invest Now.
- Kotak Standard Multicap Reg-G. Invest Now.
- Aditya Birla SL Equity-G. Invest Now.
- ICICI Pru Multicap-G. Invest Now.
- Axis Bluechip-G. Invest Now.
- ICICI Pru Bluechip-G.
"Those with an investment horizon of two-three years should invest in long-duration gilt funds to gain from capital gains once interest rates ease off," says Ranu. Long maturity bonds are more prone to interest rate risk and hence have higher yields.
Ashish should realise that debt instruments held in a debt fund are also traded and hence, have a market value. The prices may move up or down in the market. Bond prices react to changes in interest rate. If the RBI reduces interest rates, new bonds and other fixed income instruments carry lower rates.
A few weeks ago, as media reports have noted, liquid and other short-term debt funds saw a sudden fall in their NAVs, as yields across money market and debt papers had spiked. “Given the heightened risk aversion of banks, higher withdrawals from funds began, which led to funds selling bonds at a lower price.
5. Top 10 Best Debt Mutual Funds in India
| Fund name | 3-year returns | Link |
|---|
| UTI Gilt Fund | 6.78% | Invest Now |
| Axis Banking & PSU Debt Fund | 8.39% | Invest Now |
| Kotak Dynamic Bond Fund | 7.83% | Invest Now |
| SBI Magnum Gilt Fund | 7.07% | Invest Now |
- Axis Bluechip Fund Growth.
- Icici Prudential Equity & Debt Fund Growth.
- Hdfc Small CAP Fund Regular Growth.
- Kotak Standard Multicap Fund Regular Growth.
- Mirae Asset Hybrid Equity Fund Regular Growth.
- L&T Midcap fund.
- Top 10 Mutual Funds.
- Icici Prudential Bluechip Fund Growth.
Equity Hybrid Debt Solution Oriented Others Filter
| Scheme Name | Plan | 5Y |
|---|
| SBI Short Term Debt Fund - Growth | Regular | 7.93% |
| Kotak Bond Short Term Plan - Growth | Regular | 7.89% |
| Sponsored AdvInvest Now ICICI Prudential Short Term Fund - Direct Fund - Growth | Direct Plan | 8.98% |
| HDFC Short Term Debt Fund - Growth | Regular | 8.22% |
Best Short-Term Investments
- Certificates of Deposit (CDs) A Certificate of Deposit (or CD) is a great investment option for a short-term strategy.
- Treasury Securities.
- Rewards Checking Accounts.
- Bond Funds.
- Municipal Bonds.
- Peer-to-Peer Lending.
- Money Market Accounts.
- Roth IRA.
Top 10 Debt Mutual Funds
| Fund Name | Category | 1Y Returns |
|---|
| Kotak Corporate Bond Fund | Debt | 9.0% |
| Axis Banking & PSU Debt Fund | Debt | 9.2% |
| Kotak Bond Short Term Plan | Debt | 9.5% |
| SBI Magnum Medium Duration Fund | Debt | 11.3% |
A debt fund invests in fixed-interest generating securities such as corporate bonds, government securities, treasury bills, commercial paper and other money market instruments. The fundamental reason for investing in debt funds is to earn interest income and capital appreciation.
Invest in short-term (six months to one year) income funds which have a portfolio of debt securities offering higher yields at maturity. If interest rates fall from these levels, you can benefit either from capital gains or get high yield at maturity.
Debt funds are a type of mutual fund that generate returns from their investors' money by investing in bonds or deposits of various kinds. These terms basically mean that they lend money and earn interest on the money they have lent. It is in fact, by far the largest borrower (and thus bond-issuer) in the country.
Liquid Funds
As per regulatory norms, they are only allowed to invest in debt and money market securities with maturities of up to 91 days. They, too, are considered relatively safe because of the low tenure of securities.Opportunity to invest in debt instruments - Debt mutual funds provide retail investors the opportunity to invest in various debt instruments such as Government securities, bonds, Non Convertible Debentures (NCDs), etc. that retail investors otherwise cannot participate in because of higher investment limits.
