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
Top 10 Best Debt Mutual Funds to invest now
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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…
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.
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.
Hi Mr.Suresh it’s great to have such great investment insights.Do you suggest any ideal portfolio for small business owners keeping in mind child benefits and have sound portfolio with in 10 years of time with the periodic investments inclusive of equities insurance and NSC.
Hi I am new in mutual funds What is the best debt funds for 3 years investment I want high returns better than bank FD please help me. Thank you
You can invest in any of these funds indicated. All these are good ones.
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.
Hi Suresh,
I am also a new in Mutual Fund and wanted to go for long term say 2 to 3 years and looking to invest around 2 to 3Lakh. Pls suggest good Mutual fund
Thanks & Regards
Praveen
Praveen, Long term would be 8 to 10 years. If you want to invest for 2 to 3 years, better to stay away from mutual funds as you may not gain more. Try to invest atleast for 5 years in balanced funds like ICICI balanced fund or HDFC Balanced fund
Hi Suresh,
Can you brief more on HDFC & ICICI balanced fund? If I invest 1-3L, what is the gurantee on my money not going the drains? You advice would be of help.
Thanks
Philip
Philip, You should invest in such funds through SIP and not lump-sum way. You should invest such funds for 8 to 10 years to get good returns
Hi Suresh,
Very helpful piece of information up there. I am planning to invest in two debt funds i.e. Birla Sun Life Dynamic Bond Fund and Reliance Money Manager Fund with the aim of making a corpus for my son who is currently one year old. Each of these is for 60 months with INR 5000 per month of investment.
With your expertise, can you tell me if these options with the money I debit each month sounds good.
Hemant
Hemanth, You should look at what is your goal. If you invest insuch debt funds, you would get 8% to 9.5% returns. Is that what you are looking for. If your son is 1 year old, invest Rs 5K in equity funds like ICICI focussed blue chip fund or Reliance equity opportunities fund etc.
Hi Suresh, Is there any fund where I can invest through monthly SIP for a time horizon of 1 year instead going for Bank RD.I want accumulate money for my Kids school fees. Thanks in advance,
Ganesh, In such case you can consider ultra short term or short term debt funds
Hi Suresh ji,
Good morning,
Thanks for sharing so informative articles which are indeed very helpful to enhance our market knowledge.
Sir basis your recommendations I have invested INR 8 lac in May 15 in all above mentioned funds as one time investment.
I have two queries.
1)I have plan to stay invested with the above mentioned amount for 10 years.Should we look at removing “Reliance equity opportunity fund & UTI mutual fund” & replace them ICICI value discovery & SBI blue chip”
2) I am planning to start SIP in pharma & renewable energy.What will be your recommendation.
Do you or any of your recommended associates can help me in my financial planning.I am looking for customised paid services.
Regards,
Sunny
Qatar
Hi suresh thanks for the valuable advices i am completely new to mutual fund I am planing to spare 2000 rupees per month for five years. Advice me a good place to invest for getting a good return after five years.
Hi Nadeera, Invest in large cap funds like ICICI Focussed blue chip fund or HDFC Top-200 fund to start with
Hello Suresh ,
I read one of your article on SWP and to me it suggest keeping money in Debt Fund with SWP is a more tax effecient option compared to FD.
I am planning to invest 6L into Debt Fund for a monthly income of 4k via SWP , Can you suggest 2 good debt funds with emphasis on safety and decent returns that I can invest for SWP montly income option ?
Do you think investing the same money in MIP would be better choice ?
Thank You
hi Suresh, hope you are fine
I am completely new to mutual funds, never invested a penny in it. But now I am going to do so.
I want a suggestion for investing:
upto 1 year max
and
other for upto 3 years (am ok with locking period)
any recommendations plz in current market scenario.
I am fine Chirag. How about you? If you want to invest for 1 year to 3 years, invest in short to medium term funds like what I indicated in this article. However you may expect 6% to 8% returns only in one year. Invest in mutual funds for long term so that you can earn 12%+ returns.
Hi Suresh,
I am new to the Mutual funds. Is there any difference of expense ratio for Regular and Direct plan, for these debt funds ? which is better, can i go direct to the company or invest through brokers like fundsindia or others ?
Thanks
Saravana, Yes there would be. The component of MF trial fees is not paid to agents in direct plans, hence expense ratio would be lower by 0.2% to 1.5% in case of direct plans. It depends on which method you want to go. If you are willing to do KYC and maintain your own documents, better to go via direct plans.
Hi Suresh, what’s your opinion on using scripbox.com services for investing?. I think they offer only few selected mfs to invest in each segment i.e equity-4, tax saving – 2 and debit -2. Is it a good idea to start investing through them.
Kishore, I know the concept of scripbox, however I am yet to go deeper on how they performed in long run in various market cycles.
Hello sir,I am very new to mutual funds.I am a nri and have opened a NRO account in HDFC bank for investing in mutual funds.I am planning to allot Rs 10,000 every month to invest in mutual funds through sip in 5 different funds for long term.can u plz guide me in investing and what is the process to begin with.
You can invest in large cap funds which are indicated in my top-10 mutual funds article to start with. Once you are familiar, keep adding new funds and invest through SIP
you can also invest in BSL Frontline Equity/ICICI Pru Value Discovery/SBI Bluechip
For sectoral SBI Pharma is good option
Hello sir a already invest in 2 mutual fund, 1 – ICICI Prudential Focused Bluechip Equity Fund 2 – HDFC Mid-Cap Opportunities Fund ,,, and want to invest more 3/4 mutual fund,, for long approx 10 yr,,
ICICI Prudential Exports and Other Services Fund
HDFC Balanced Fund
Franklin India High Growth Companies Fund
can i invest this 3 mutual fund for long term…
Good funds, you can invest.
Hi Suresh,
Your article are really useful and informative.
I am looking for your suggestion on my investments.
I am 36 old and I have 3LICs (83,000/anum premium) and 2-MFs (HDFC Mid cap and Franklin mid cap 2*5000/ month ) and PPF recently started 5000/ month.
Now I want to invest 10,000/month. So, can you guide me on this and let me know your comment on my current investments.
Thanks,
Ramakrishna.
Ramakrishna, You can invest in top large cap funds. Check my article link indicated in home page.
good work Suresh!!!! keep it up
Hi Suresh..thanks for a very useful and a well written piece..very happy to be connected with you
regards
Sourirajan
appreciate info on taxation on gains and withdrawals…
Thx for the info…do we get monthly income on this. If yes how much
Appreciate your help
No MG. These are not MIP Mutual funds. If you are looking for monthly income, you can opt for MIP mutual funds. If you opt for dividend option in Debt funds, they would give your regular income. If you opt for growth option, the amount would get accumulated and would be paid back to you when you redeem your mutual funds.
How about Equity Arbitrage funds instead? You would get tax free dividends and tax free capital gains if you redeem after 1 year.
Harsha Gupta, Arbitage funds would provide tax free returns after 1 year. Arbitrage funds has exhausted opportunities and investors are pulling back their money. If one want to invest for 1-3 years, they can choose arbitrage funds as they provide higher post tax returns. However for more than 3 years, debt funds are better.
Hi Suresh,
What is a Debt Mutual Fund? and how does it differ from the other MFs?
Thanks,
Denzil
Denzil, If you refer first paragraph, it gives complete details. These would invest in fixed income opportunities. These would provide returns. On other hand, equity funds invest in stocks. In a year they may provide 50% returns, but next year, they can provide minus 20% returns.
Dear Suresh ,
Thank You for putting up this write up on Debt Mutual Fund , I have been waiting for this as I have in recent past invested in Debt Fund , I am using the Debt Fund to do STP into SIP for the recent SIP I have started the older ones which were started by my MF agent uses Bank Transfer for SIP.
My current Portfolio in Debt MF is mentioned below
HDFC Gilt Fund – Long Term Plan – Direct Plan – Growth Option – 50K ( Debt: Gilt Medium & Long Term )
HDFC High Interest Fund – Dynamic Plan – Direct Plan – Growth Option – 1 Lac ( Debt Income )
HDFC Income Fund – Direct Plan – Growth Option – 1 lac ( Debt Income )
HDFC Liquid Fund – Direct Plan – Growth Option – 2 Lac ( Liquid )
I use the Liquid Fund to do STP to my HDFC SIP i.e HDFC Balanced Fund 2k pm
Also I have invested in ICICI Debt MF
ICICI Prudential Flexible Income – Direct Plan – Growth ( Ultra Short Term Debt ) 40 K
ICICI Prudential Long Term – Direct Plan – Growth ( Debt Income ) 1 Lac
ICICI Prudential Banking & PSU Debt Fund – Direct Plan ( Debt Income ) 1 Lac
From ICICI Debt I use the Ultra Short Term MF to do a STP for 3 SIP I have in ICICI
The Goal is to keep around 12-14 Lacs in Debt Fund which over period of 12-15 years would end up in SIP via STP. I do understand the fact that Debt Fund is not 100 % safe but this is what I managed to do after reading many of your write up and my own little research on subject.
I want to know if this is the right approach as the money I have invested into would be for a period of 10-12 years that would eventually end up in SIP via STP ? Do you think I should change my Debt Portfolio in any way ?
I would also be getting around 14 Lac from my PF which after reading you write up on Income from Fixed Scheme thought would invest in PO MIS Scheme which gives 8.4 % and then using the MIS to RD of PO which gives compound interest rate of similar value and this would end up in long term duration and there is no risk of TDS for POS
But since the PO gives low interest would be be fine if I invest in specific Debt Fund instead of PO and which one would you suggest for long term ?
Thank You for your reply.
Joseph, This is what I keep advicing investors. You can invest in debt funds and do STP to equity funds through SIP. I would advice you to invest in debt funds / bank FD’s instead of PO RD as they give low interest.
Thank You Suresh , Your website has helped me immensely in planning my investment , My Gratitude to you for answering my queries.
My apprehension on bank FD is they do a TDS while in PO MIS/RD I dont have to worry about TDS. While I do understand the low return ( 8.4 % ) for PO MIS/RD scheme.
Is there a comparision that can be done for Bank FD and PO MIS/RD returns for 5 years term taking into account Tax one needs to pay ?
Thank You
Joseph, While TDS is not deducted by post office, you still need to declare and pay income tax as per income tax slab. Now Banks are offering low interest compared to post office. You can check the banks which are offering higher interest rate compared to PO and then invest in them
thank you suresh.
Suresh. Thx. 2 Qs. 1)Given the 3 yr hold limit for ltcg ( even then20% tax but saving grace is indexation available), how to play the tax angle2) what’s the best mode of inv in these funds? Sip or lump sum. Conventional wisdom is put it in lump sum since they don’t fluctuate much. But imagine u put lump sum 5 yrs ago in icici long term, it is showing 10% now for 5 yrs but I am sure that it wd hv dipped or remained below par in some years. Otherwise 19% in 1 yr vs 10% for 5 may not have happened.
Hi Specialist, After 3 years, and after indexation, tax amount would be very low. These are definitely provide good returns compared to bank FD’s. In debt funds, you can invest lump sum or through SIP. What you are seeing is 10% annualised returns in 5 years. Means 10% x 5 years. It is not just 10% in 5 years.