The ultimate financial objective is to save money for the future, and an effective way to achieve the goal is in the form of investment. One such form is the Debt funds. Debt funds, in general, are a form of mutual fund that provides financial security for a fixed duration. The investment is based on the fixed turnover providing instruments like deposit certificates and government T-bills.Read more
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The key feature of the debt fund is to generate a stable income by appreciating the value of the fund. However, the returns depend entirely on the performance of the funds in the market.
To know the best Debt fund to invest in, one should know its kinds. You can choose your fund only when you have a clear idea of the kinds of Debt funds.
In accordance with the name, these funds are dynamic in nature. Here, the composition of the portfolio will keep changing with the changing rate of interest regime. They have various periods of maturity because these funds can take calls on the interest rate. The investment can be made in a longer or shorter maturity, depending on the instruments.
Income funds depend on the rate of interest. It offers lengthened maturities for the invested Debt securities. Hence it is more consistent than dynamic bond funds. An average period of maturity for income funds is about five to six years. It is one of the best Debt funds to invest in.
Liquid funds come with an investment in debt securities with a period of maturity of up to 91 days. This is the reason that liquid funds are considered a riskless investment. It has barely seen any negative returns. These funds stand as a better replacement for savings bank accounts. They offer close liquidity along with a higher return.
In short-term funds, you can invest in debt instruments with a shorter maturity period, ranging from one to three years. They are perfect for conservative depositors as they will not get affected by the fluctuation in interest rates. Ultra short-term funds have a maturity period of 3 to 6 months. The risk factor associated with these is low as they offer low maturity duration.
These funds have an investment only in government instruments as they are highly valued securities with minimal credit risk. It is one of the perfect options for fixed income investors, along with the lower level of risk.
There are several parameters that need to be considered to select the best Debt fund to invest in.
You have to consider the stability of the returns in terms of every interval, i.e., one, three and five years. It is preferable to invest in a fund that has exceeded its yardstick index and other funds in a compatible manner over various ranges of investments.
The financial ratio will help in analysing the fund with factors such as standard deviation, Sharpe index, alpha and beta. When you invest in a fund with a higher Sharpe index, you can get higher returns under the additional risk taken.
You need to make sure that the fund you invest in, needs to have a good historical performance. This means that it is better to ensure that the fund has a stable and successful track record over five to ten years. This is the key factor in selecting the best Debt fund to invest in.
This is the amount you require to maintain your fund. You need to be careful in selecting the Debt fund in such a way that it offers a low expense ratio but with high performance.
Any Indian citizen above the age of 18 years can invest in Debt funds. Here are some of the documents that you require while investing in funds,
Minors are also allowed to invest in Debt funds. For the process, a declaration from the third party is essential.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
Here is the list of some of the debt funds providers:
This plan's main objective is to raise an even income by providing a portfolio that consists of fixed-income instruments. These instruments give a floating rate of interest. And the fund type is floating rate. The period of maturity and their interest rates are as follows:
DSP Government Securities Fund provides an opportunity to the investors in earning a good return. The investment is based on the instruments that are issued by the Indian Central Government. The fund type is Government bond. The maturity and the rate of interest are:
It is an open-ended debt plan that is invested primarily in government instruments over various maturity periods. The plan provides a varied portfolio with a combination of both State and Central government bonds. Edelweiss Government Securities Fund is a government bond type, and here are the maturities with the interest rate:
The prime objective of this bond is to raise a reasonable return and, in this bond, you can invest in the fixed-income instruments ranked AA+. L&T Triple Ace Bond Fund is a corporate type bond. The period of maturity and the interest rates are:
This scheme is best suited for the investors who plan to invest money for a longer duration on government instruments provided by both the State and the Central government. The fund type of the SBI Magnum Gilt Fund is a government bond, and the maturities are as follows:
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
*All savings are provided by the insurer as per the IRDAI approved insurance
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
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