HomeMutual FundsBest Debt Mutual Funds to Invest in 2016-2017

Best Debt Mutual Funds to Invest in 2016-2017

Debt Mutual Funds is very good short term investment option that offers multiple benefits to the investor. However, very few people know about debt fund in detail.

When it comes to investment people usually invest in fixed deposit and remain happy with below average return. If you are risk adverse investor and planning to invest your money I would advise you to invest in debt fund instead of fixed deposit. In order to help you, I have analysed and compiled Best Debt Mutual Funds for the investment. Before taking an actual look at best debt fund let’s check what is debt mutual fund? What benefits it offers?

What is Debt Mutual Fund?

A debt mutual fund is an investment option that invests your money in fixed or variable return investment schemes like a government bond, treasury bills etc. The investment objective of a debt mutual fund is usually safety of capital and generation of income.

The return offered by debt mutual funds depends on interest rate applicable in the market. A good debt mutual fund offers return in the range of 10-12%.

Type of debt funds

Debt funds are classified in various categories such as –

  • Short term Debt Fund
  • Ultra Short Term Debt Fund
  • Long Term Debt fund
  • Gilt Fund
  • Income Funds

Also Read – Top 10 Best Monthly Income Plan MIP for Investment

Benefits of Debt Mutual Funds

Debt Mutual Funds gives following benefits to the investor.

  • Debt Mutual Funds usually gives higher returns compare to fixed deposit.
  • Investment in this fund is not affected by equity market volatility.
  • You can withdraw your money anytime. You need to pay exit load.
  • Debt fund offers better post tax returns.
  • You can beat Inflation.
  • Debt fund adds stability to your investment portfolio.
  • You have option to select the fund based on your investment horizon.

How to identify best debt mutual funds for investment 

In order to identify best debt fund for investment, answer following questions first.

  • What is my investment objective?
  • What is my risk capacity?
  • What is my investment horizon?

Once you have an answer to these questions access your current asset allocation and identify a type of debt fund suitable for your requirement. Once you zero down with a type of debt fund select best debt fund based on following parameters.

  • The past performance of funds (3 to 5 years).
  • The rating by CRISIL.
  • A reputation of Fund House in the market.
  • Asset under management.

I have evaluated various debt funds based on mention parameters and selected following best debt funds for the investment.

Also Read – 7 Ideas to Create a Second Income

Best Debt Mutual Funds to Invest in 2016-17

Ultra Short Term Debt Fund

Ultra Short Term debt funds invest in fixed income financial instruments that are highly liquid in nature and have short term maturities. A maturity of these type of fixed investment varies from 90 days to 1 year. This type of fund is suitable for the moderate investors with a short term investment horizon of 1 to 6 months. You can consider this fund in increasing interest rate condition.

Short term Debt Fund

Short term debt fund invest mainly in debt instrument with maturity up to 3 years. These types of funds are likely to give better return compare to ultra-short term debt funds. Short Term debt fund is suitable for low to moderate risk investor with an investment horizon of 9 to 12 months.

Long Term Debt fund

Long term debt fund invest in the government of India bond and corporate securities for the longer duration usually 5-10 years. If you are risk adverse long term investor you can select long term debt fund.

Gilt Fund

Gilt Funds are funds that invest in government securities only. These type of funds are 100% risk-free. This type of fund is advisable for the conservative or first timer investors. You can consider this fund in falling interest rate condition.

best debt mutual funds

Over to You –

Looking at series of benefits you must agree with me that debt funds are worth to consider for the investment. If you are in 20-30% tax bracket invest it is advisable to invest in debt fund over a fixed deposit for better post tax returns.

Do you keep debt fund in your portfolio?

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Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money. Please note that the views expressed on this Blog are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment , tax, financial advice or legal opinion. Please consult a qualified financial planner and do your own due diligence before making any investment decision.