Top 10 Best Debt Mutual Funds to invest now
Banks have been reducing fixed deposit interest rates in the last 1 year. I wanted to park some surplus money, but scared looking at the Bank FD rates. I have analyzed Top 10 best debt mutual funds which have been giving good returns in last 4-5 years. I thought of sharing them with you too. Which are the top 10 best debt mutual funds to invest now in India? Which are the good debt mutual funds to invest for short term, medium term and long term?
How I picked-up these top 10 best debt funds to invest?
These top 10 debt mutual funds to invest in India have been analyzed and shortlisted based on some of the important parameters.
- These are picked based on highest returns received in the last 5 years.
- Debt mutual funds which are rated as 5-Star (5/5) by value research online.
- Funds, which are rated by Crisil as Rank-1, Rank-2, Rank-3 and Rank-4 which indicates top performance across various market cycles. Two funds have not been rated by Crisil, however, I have considered the same based on other parameters.
- AUM (Assets under management) > ₹ 100 Crores. This proves investor confidence among these top 10 mutual funds. As an exception, I have considered one good fund, which has an AUM of ₹ 59 Crores.
- Some of the funds might be a repetition from my earlier recommendation.
Also Read: Top 5 Balanced Mutual funds to invest in 2015
Top 10 Best Debt Mutual Funds to invest now
I have separated them as an ultra short term, short term, income funds and gilt mutual funds.
a) Ultra Short Term
Ultra short-term funds invest in fixed-income instruments which are mostly liquid and have short-term maturities within 90 days. These funds offer investors greater protection against interest rate risk than longer-term bonds. An investor who is willing to invest for 3-6 months can invest in these top ultra short term mutual funds. I advise you to invest at least for 6 months to get good returns.
b) Short Term Debt Funds
Short Term funds invest in fixed income instruments which matures in short term of 3 months to 1 year period. An investor who is willing to invest for at least 1 year can invest in these top ultra short term mutual funds.
c) Debt – Income funds
Debt income funds invest in various fixed income options, maturing between medium term to long term and expect regular income from such options. If you are willing to park your money for medium term to long term of 1 to 5 years, you can invest in these funds. Note that these funds does not limit to investing in Govt bonds, but invests in corporate bonds too.
d) Gilt-Medium/Long Term
Gilt Funds are those funds that invest only in government securities. They are preferred by risk averse and conservative investors who wish to invest in the shadow of secure government bonds. Since gilt funds invest only in government bonds, investors are protected from credit risk. Due to fall in interest rates, bond yields have been increasing, hence Gilf funds performed better in last 1 year and gave very high returns.
Also Read: How should you invest lump sum money in Mutual funds?
Conclusion: Instead of worrying about reducing bank FD interest rates, one can look at these best debt mutual funds and start investing based on the period for which an investor want to invest. Gilt funds have been performing better due to fall in interest rates. One may not get such good returns going forward. However, one can expect higher returns compared to bank FD schemes. If you can invest for at least 36 months in income/gilt mutual funds, you can get indexation benefit and tax on such debt funds would be very low.
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Suresh
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70 comments
Add a comment ↓i want to invest 5 lakh in best debt fund for one year.plese suggest me.
Hi Nilima, Instead of investing in 1 fund, you can select for 3-4 funds and invest in them. You can invest in any of the funds indicated in this artilce.
As an NRI what are the best schemes to invest in India in terms or Mutual bonds/funds.
in terms of long term and ultra short term.
is there any other high returns apart from mutual bonds.
can you suggest for 2016? how about reliance money manager
dear sir,
i want to invest in elss should i invest by sip or lumpsum.
sir,
i want to invest in elss should i invest in lump sum or in sip which is benifited to me ?
dear Sir,
I have 10 lakhs cash and would like to invest in mutual funds for long span of 5 to 6 years.
My age is 46 years and daughter age is 14 years and purpose is my child education and marriage.
please suggest..
Babu
Hi Ramesh, Mutual funds perform well over long run. Looks you have time limit of 5-6 years only. 1) You can invest in debt funds and do SIP to large cap funds for next 8-10 months 2) Alternatively you can invest in balanced funds now. But there could be risk as you have time bound.
Dear sir,
I regularily read your articles and these are realy very useful.
I am having INR 12 lacs with me ans want to invest in good debt fund to earn monthly income.
Kindly advise which one is good mutual fund for monthly income and how much monthly income I get if invest INR 12.00 lacs.
Thanks
Shyam
You can invest in these funds. Alternatively wait for 3-4 days, I am publishing latest article on debt funds
Dear Sir,
I will wait for your article.
I WANT TO INVEST IN THE TIME HORIZON OF ONE YEAR WITH MAXIMUM RETURN ONLY IN DEBT FUND .SUGGEST THE BEST FIT FUND WITH BEST FIT OFFER.EXPECTING YOUR GUIDANCE.REPLY MAY ALSO BE FORWARDED TO MY E MAIL
Dear Suresh,Your article on best debt funds is very informative.This article now is one year old ,kindly update for the benefit of your blog readers.Thanking you.
Sure Dr Bansal
Dear Suresh,
What is your view on dynamic bond funds?
dynamic bond funds keep providing good returns during declinig interest rates. Currently interest rates are in down trend, you can invest in short to medium term
Dear Sir,
I want to invest in best debt mutual fund in growth option and wishing to get fixed income quarterly.
Please suggest few such mutual funds with rankings.
If however F M P can satisfy such goal that may also be guided.
Please send the reply in my e mail as well,
Expecting your cooperation
You can invest in any of these funds Debasish. All these are good
Dear Suresh,
Kindly suggest some best debt fund for a time horizon of 3-5 years. I came across these two funds:
Tata dynamic bond fund
HDFC high interest dynamic plan.
Are these two good or is there better option?
…There seems to be factual errors! I just compared with the data shown on Value Research site …and the one year return for SBI Magnum Gilt fund is 4.06 percent while your post is reflecting that to be 21.01 percent!!
Rajiv, This article is written in Apr-2015. 1 Year return refers to Apr-2014 to Apr-2015. Now we are in Feb-2016. VRO 1 year return refers to Feb-2015 to Feb-2016 (till date). There is no error
Like most advisers, even here we see analysis of what the returns have been. Although it does take effort, it by no means a reflection of any wisdom or experience. What is really needed is sound advise based on the current and probable economic situation of what investments are likely to give better or superior return, Just analysing the past and creating a false hope that they continue to still be the best is misleading.
For 10 top debt fund recommended, exit charges are very high in some funds…