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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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 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..


    1. 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.

  2. 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.




  3. 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.

    1. 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

  4. 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

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