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Top 10 Best Debt Mutual Funds to invest now

Top-10 Best Debt Mutual funds to invest Apr-2015Top 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) > Rs 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 Rs 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?

Top 10 Debt Mutual funds to invest now April-2015

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
Top 10 Best Debt Mutual Funds to invest now

Suresh KP

70 thoughts on “Top 10 Best Debt Mutual Funds to invest now”

  1. 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?

  2. …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!!

    1. 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

  3. 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.

  4. Hi my current portfolio is as under

    Due for renewal (SIP INR 5000/month)
    1. HDFC Prudence Fund Growth Oct 12 till Sep 15 CV- INR 225K
    2. ICICI Pru Focused Bluchip Eq Fund Oct 12 till Sep 15 CV-INR 220K
    Regular Plan – Growth
    3. IDFC Premier Eq Fund-Reg Pln-G Oct 12 till Sep 15 CV-INR 250K
    4. SBI Emerging Business Fund Sep 11 till Sep 15 CV-INR 350K
    Regular Plan – Growth
    5. UTI Opportunity Fund-G Oct 12 till Sep 15 CV-INR 200K

    Old Investment (No new investment)
    1. Franklin India Prima Fund Growth Sep 10 till Aug 11 CV – INR 140K
    2. HDFC Equity Fund – Growth Sep 10 till Aug 12 CV – INR 200K
    3. HDFC Top 200 – Growth Sep 10 till Aug 12 CV – INR 200K
    4. ICICI Pru Value Discovery Fund Sep 10 till Aug 12 CV – INR 280K
    Regular Plan – Growth
    5. Franklin India Taxshiled-G Oct 12 till Mar 15 CV-INR 150K
    6. ICICI Pru Tax Plan-Reg Plan-G Oct 12 till Mar 15 CV-INR 150K

    Please advise the following;
    1. Which SIP to start for next 12 months from the above or new – Total investment planned 50k/ month
    2. Which of the above need to exit through sale

    Please note that I do not have any immediate fund needs. The investment horizon is for long term say 5 years plus.

    1. Hi my current portfolio is as under

      Due for renewal (SIP INR 5000/month)
      1. HDFC Prudence Fund Growth Oct 12 till Sep 15 CV- INR 225K
      2. ICICI Pru Focused Bluchip Eq Fund Oct 12 till Sep 15 CV-INR 220K
      Regular Plan – Growth
      3. IDFC Premier Eq Fund-Reg Pln-G Oct 12 till Sep 15 CV-INR 250K
      4. SBI Emerging Business Fund Sep 11 till Sep 15 CV-INR 350K
      Regular Plan – Growth
      5. UTI Opportunity Fund-G Oct 12 till Sep 15 CV-INR 200K

      Old Investment (No new investment)
      1. Franklin India Prima Fund Growth Sep 10 till Aug 11 CV – INR 140K
      2. HDFC Equity Fund – Growth Sep 10 till Aug 12 CV – INR 200K
      3. HDFC Top 200 – Growth Sep 10 till Aug 12 CV – INR 200K
      4. ICICI Pru Value Discovery Fund Sep 10 till Aug 12 CV – INR 280K
      Regular Plan – Growth
      5. Franklin India Taxshiled-G Oct 12 till Mar 15 CV-INR 150K
      6. ICICI Pru Tax Plan-Reg Plan-G Oct 12 till Mar 15 CV-INR 150K

      Please advise the following;
      1. Which SIP to start for next 12 months from the above or new – Total investment planned 50k/ month
      2. Which of the above need to exit through sell

      Please note that I do not have any immediate fund needs. The investment horizon is for long term say 5 years plus.

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