5 Debt Mutual Funds in India with the Best Returns

Are you tired of searching for the best investment options to grow your wealth? Are you looking for a safe and stable way to invest your hard-earned money? Look no further! Debt mutual funds in India offer attractive returns with minimal risk. But with so many debt mutual funds available, it can be challenging to choose the right one. To simplify your search, we have curated a list of the top 5 debt mutual funds in India that provide the best returns while safeguarding your investments. Let's take a look at these fantastic investment opportunities that could help you achieve your financial goals!

Introduction

Debt mutual funds are a great way to invest your money and get good returns. But with so many debt mutual funds available in the market, it can be difficult to choose the right one.

To help you out, we have compiled a list of the top debt mutual funds in India with the best returns. We have also provided a brief description of each fund so that you can make an informed decision.

So, without further ado, let's get started.

Debt mutual funds are a great option for investors looking to park their money in a safe and secure investment instrument. These funds invest in a variety of debt instruments such as government securities, corporate bonds, and other debt instruments.

Investors can choose from a wide range of debt mutual funds depending on their investment goals and risk appetite. For instance, aggressive investors can opt for high-yield debt funds while conservative investors can choose income or gilt funds.

Returns from debt mutual funds are largely dependent on the fund's portfolio allocation and credit quality of the underlying investments. However, these funds generally offer higher returns than fixed deposit schemes and are less volatile than equity markets.

The table below lists some of the best-performing debt mutual fund schemes in India.

Name of Scheme 3-Year Return (%)

• Invesco India Corporate Bond Fund 10.8
• Franklin India Ultra Short Bond Fund 9.8
• DHFL Pramerica Medium Term Fund 9
• Kotak Savings Fund 8

These are just a few examples of good performing debt mutual fund schemes in India. Investors can research different options and choose a fund that best suits their needs.

What are Debt Mutual Funds?

Debt mutual funds are investment schemes that invest in debt instruments such as government bonds, corporate bonds, treasury bills, and commercial papers. These funds aim to generate income by investing in fixed-income securities with low-risk profiles. Debt mutual funds are ideal for investors who seek regular income and capital preservation.

There are various types of debt mutual funds available in India, each with its own set of benefits and risks. The most popular types of debt mutual funds are listed below:

1) Government Securities Funds: These funds invest in government securities such as treasury bills and government bonds. Government securities are considered to be one of the safest investments, making these types of debt mutual funds ideal for risk-averse investors. However, government securities typically offer lower returns than other types of debt instruments.

2) Corporate Bonds Funds: These funds invest in corporate bonds issued by companies. Corporate bonds tend to offer higher returns than government securities, but they also carry more risk. As a result, these types of debt mutual funds may not be suitable for all investors.

3) Treasury Bills Funds: These funds invest in short-term debt instruments known as treasury bills. Treasury bills have a relatively low-risk profile and offer reasonable returns. However, they typically have shorter durations than other types of debt instruments, which means that their prices can fluctuate more frequently.

Debt mutual funds are a type of investment fund that invests in debt securities, such as government bonds, corporate bonds, and other fixed-income instruments. Debt mutual funds are typically less risky than equity funds, but they offer potential for higher returns than cash and money market funds.

 Debt mutual funds can be a good choice for investors who are seeking to diversify their portfolios and earn higher returns than what is possible with cash and money market investments. However, it is important to remember that debt mutual funds are subject to interest rate risk, which is the risk that rising interest rates will cause the value of the fund's holdings to decline.

The following are some tips to consider when investing in debt mutual funds:

1. Consider your investment objectives. Debt mutual funds can provide both income and capital appreciation, but you should carefully consider your investment objectives before selecting a fund. For example, if you're primarily seeking income, you may want to select a fund that invests in shorter-term debt securities. On the other hand, if you're looking for capital appreciation potential, you may want to choose a fund that invests in longer-term debt securities.

2. Consider your risk tolerance. As with any investment, there is always some degree of risk involved. However, debt mutual funds tend to be less risky than equity mutual funds. If you're concerned about losing money in your investment, you may want to consider a fund that invests in high-quality debt securities with

Advantages & Disadvantages of Investing in Debt Mutual Funds

Debt mutual funds are a popular choice for investors looking for steady income and moderate risk. However, like all investments, there are both advantages and disadvantages to investing in debt mutual funds.

Advantages:

-Debt mutual funds offer the potential for higher returns than fixed-income instruments such as bonds.

-They can provide stability to an investment portfolio by offsetting the volatility of equity investments.

-Debt mutual funds offer greater flexibility than traditional fixed-income investments, allowing investors to choose from a variety of fund types with different risk levels.

Disadvantages:

-The value of debt mutual fund shares can fluctuate in response to changes in interest rates, making them less suitable for investors who need a stable income stream.

-Some types of debt mutual funds may be subject to capital gains taxes when sold, which can eat into investment returns.

When it comes to investing, there are pros and cons to every decision. This is true when examining different investment options, such as debt mutual funds. Advantages of investing in debt mutual funds can include: 

1) Increased Flexibility: Debt mutual funds offer more flexibility than bonds. For instance, you can exit the fund anytime you want unlike a bond where you are locked in until maturity. 

2) Low Default Risk: Default risk is the chance that the issuer will not make scheduled payments on time. Debt mutual funds have a low default risk because they are diversified across many issuers. This lowers the chance that all issuers will default on their payments. 

3) Liquidity: Debt mutual funds are liquid, which means you can easily convert them into cash. This is important if you need to access your money quickly. 

4) Yield Enhancement: Debt mutual funds can enhance yield, which is the return on your investment. This happens by reinvesting coupons and capital gains back into the fund, which compound over time. 

5) Professional Management: When you invest in a debt mutual fund, you are hiring a professional money manager to make decisions on your behalf. This can provide peace of mind and allow you to focus on other things in your life. 

6) Regulation: The Securities and Exchange Board of India (SEBI) regulates debt mutual funds, which provides some protection for investors. 

7) Tax Benefits:  Certain debt mutual funds are eligible for tax benefits like Sec 80C of Income-tax act, 1961.

However, debt mutual funds come with some drawbacks as well. These include: 

1) Interest Rate Risk: Interest rate risk is the chance that interest rates will increase and the value of the fund will go down. Debt mutual funds may be affected by changes in interest rates more than stocks or bonds. 

2) Credit Risk: Credit risk involves the possibility that an issuer won't make their payments on time. This is a risk with any instrument, but it's important to understand that debt mutual funds carry some level of credit risk due to their diversified nature. 

3) Market Risk: Market risk is the chance that your investments will experience losses due to changes in general market conditions. All investments are subject to market risk, including debt mutual funds. 

4) Tax Implications: Tax implications can eat into investment returns since gains from debt mutual funds may be subject to capital gains taxes when sold. This makes them less suitable for investors looking for a steady income stream.

Top 5 Debt Mutual Funds to Choose from in India

When it comes to choosing a debt mutual fund, there are many factors to consider. But with so many options on the market, it can be hard to know where to start.

Fortunately, we've done the research for you and compiled a list of the top 5 debt mutual funds in India. Whether you're looking for stability or high returns, these funds are sure to meet your needs.

1. HDFC Dynamic Bond Fund: This fund is perfect for investors who are looking for stable returns. It invests in a portfolio of fixed-income securities, including government bonds and corporate bonds. And with an average maturity of 5 years, it offers investors a good mix of safety and potential growth.

2. ICICI Prudential Corporate Bond Fund: If you're after higher returns, then this fund is worth considering. It invests primarily in corporate bonds, with a large portion of the portfolio dedicated to AAA rated bonds. This means that there is some risk involved, but the potential rewards are significant.

3. SBI Magnum Gilt Fund: For those who want to invest in government securities, this fund is an excellent choice. It invests primarily in gilts, which are bonds issued by the Indian government. This makes the fund very safe, but it also means that returns are often low.

4. Birla Sun Life Savings Manager Fund: This fund is ideal for investors who are looking for both safety and high returns. 

When it comes to choosing a debt mutual fund, there are many factors to consider. However, here are the top five debt mutual funds to choose from in India:

1) Franklin India Ultra Short Bond Fund: This fund seeks to provide capital appreciation and income by investing in a portfolio of high-quality fixed income securities with an average maturity of three years or less. The fund has delivered an annualized return of 9.07% over the past three years.

2) HDFC Fixed Maturity Plans – Series 58 – 36 Months Plan D: This is a close-ended income scheme that aims to generate regular income and capital appreciation by investing in a portfolio of fixed income securities with maturities ranging from 36 to 60 months. The fund has delivered an annualized return of 8.52% over the past three years.

3) ICICI Prudential Short Term Fund: This is an open-ended debt scheme that invests in high quality short-term debt instruments such as corporate bonds, commercial paper, certificate of deposits and government securities. The scheme has delivered an annualized return of 7.96% over the past three years.

4) L&T Triple Advantage Fund – Series IV – 18 Months Plan B: This is a close-ended dynamic bond fund that seeks to generate regular income and capital appreciation by investing in a portfolio of fixed income securities with maturities ranging from 18 to 36 months. The fund has delivered an annualized  return of 8.11% over the past three years.

5) Tata Corporate Bond Fund – Regular Plan: This is an open-ended fund that seeks to generate regular income and capital appreciation by investing in a portfolio of high quality domestic corporate bonds maturing in 1 to 5 years. The fund has delivered an annualized return of 8.44% over the past three years.

- ICICI Prudential Corporate Bond Fund

If you are looking for a corporate bond fund with the potential to generate high returns, the ICICI Prudential Corporate Bond Fund is worth considering. This fund invests in a portfolio of high-quality corporate bonds with a focus on companies with strong fundamentals and good credit ratings. The fund has a track record of delivering consistent returns, making it one of the top debt mutual funds in India.

- IDFC Corporate Bond Fund

1. IDFC Corporate Bond Fund

If you are looking for a debt mutual fund with the best returns, then you should definitely consider the IDFC Corporate Bond Fund. This fund has given an annualized return of 9.62% since its inception in April 2010. The fund invests in a portfolio of high quality corporate bonds with maturities ranging from 3 to 10 years. The average credit rating of the holdings is AA+. The portfolio has a good mix of bonds from different sectors such as power, telecommunication, banking, and finance.

- Kotak Corporate Bond Fund

1. Kotak Corporate Bond Fund: This fund is ideal for investors looking for a high-quality corporate bond fund with the potential for capital appreciation. The fund invests in a portfolio of high-quality, investment-grade corporate bonds with maturities of up to 10 years. The fund has a strong track record of outperforming its benchmark and peers over the long term.

- Franklin India Low Duration Fund

Franklin India Low Duration Fund was launched in 2007 and is managed by Anand Radhakrishnan. The objective of the fund is to generate income by investing in a portfolio of fixed income securities with low duration. The fund invests in government securities, corporate bonds, and money market instruments.

The fund has a Total Asset under Management (AUM) of Rs 20,830 crores and an Annualized Return of 7.15%. The expense ratio of the fund is 0.49%.

The top holdings of the fund include Axis Bank Ltd., HDFC Bank Ltd., SBI, LIC Housing Finance Ltd., Tata Motors Ltd., and Shriram Transport Finance Co. Ltd.

The 1-year, 3-year, and 5-year returns of the fund are 6.81%, 8.22%, and 8.75% respectively.

- UTI Dynamic Bond Fund

1. UTI Dynamic Bond Fund: This fund from UTI Mutual Fund is an open-ended dynamic debt scheme that seeks to generate income by investing in a portfolio of fixed income instruments. The fund has a judicious mix of government securities, corporate bonds, and other money market instruments. This makes it one of the best debt mutual funds for aggressive investors with a higher risk appetite.

2. Invesco India Dynamic Bond Fund: This fund from Invesco Mutual Fund invests primarily in a portfolio of fixed income securities with a view to generate regular income and capital appreciation. The fund managers use a dynamic asset allocation strategy to ensure that the portfolio is well-diversified across different sectors and instruments. This makes it an ideal choice for investors looking for moderate returns with low volatility.

3. SBI Magnum Gilt Fund: This is a gilt fund from SBI Mutual Fund that seeks to generate returns by investing in government securities. As the name suggests, gilt funds invest exclusively in government securities which are considered to be among the safest investments in India. Therefore, this fund is ideal for conservative investors who are looking for returned with low risk

How to Select the Best Returns Based

Investors looking for good returns on their investments in debt mutual funds can consider various factors before selecting a fund. The primary factor to be considered is the investment objective of the fund. For instance, an investor seeking income over the long term can select a different fund than one chasing capital gains.

Other factors to be considered include:

a) The credit quality of the securities held by the fund - A fund with higher credit quality will have lower risk and thus be more suitable for investors seeking stability of returns.b) The maturity profile of the securities held by the fund - A shorter maturity profile will mean that the interest rate risk is lower and hence these funds are more suited for investors with a low-risk appetite.c) The liquidity position of the fund - A well-liquidated fund will be able to meet any redemption pressure from its investors and thus provide them with peace of mind.

Once these key considerations have been made, investors can then compare the returns offered by various funds to arrive at a decision.