Top and Best Income Mutual Funds to invest in 2016
Income Mutual funds are long term debt mutual funds. These are alternatives to fixed income investments like bank FD’s, corporate fixed deposits etc., If you are moderate to high risk investor, you can invest in these income mutual funds and expect 8% to 12% annualized returns. What are Income Mutual Funds? Which are the best and top income mutual funds to invest in 2016? What are the risks and negative factors of investing in these best income mutual funds?
What are income mutual funds in India?
Income mutual funds are long term debt mutual funds which invests in corporate bonds, government bonds and securities and money market instruments. It would provide 8% to 12% annualized returns if invested in top income mutual funds. These are high volatile mutual funds and fluctuate with interest rate changes. Moderate to high risk appetite investors can invest in these mutual funds. One should invest them from medium term to long term of 1 to 5 years to get superior returns.
Also Read: Top SIP Mutual Funds to invest in India in 2016
Why should you invest in Income Mutual funds?
There are several reasons why you should invest in income mutual funds.
- These income mutual funds invests in fixed income options like corporate bonds, govt securities etc which are expected to provide stable returns.
- These are alternatives to bank FD’s to get fixed income though not guaranteed.
- Income mutual funds are expected to get higher yield during fall in interest rates. Since we are expecting RBI to reduce repo rate in coming quarters which would further reduce current interest rates, these income mutual funds are expected to yield higher returns as it is already investing in high return bonds.
- These are good for high tax bracket individuals as post tax returns would be higher compared to other fixed income options.
Negative factors of investing in Income Mutual funds
While there are several positive factors, there are a few negative and risk factors of investing in such debt income mutual funds.
- These are vulnerable to interest rates. Means in future if interest rates are going up, these funds may under-perform.
- Does not give any fixed or guaranteed returns.
- These invests in corporate bonds which may be high risk. Classic example was JPMC debt mutual funds which invested in Amtek Auto bonds and credit rating agencies downgraded Amtek auto debt instruments. JPMC mutual fund house has to put restriction on redemption of such bonds.
- Does not suit for low tax bracket investors as post tax returns are low compared to other fixed income options.
What is the tax treatement of Income Mutual Funds?
These would fall under debt mutual funds.
- Redemption < 3 Years: Capital gains arising within 3 years from the date of purchase are treated as short term capital gains and such gains needs to be added to individual income and income tax has to be paid as per individual income tax slab. Say if you are in 30% tax bracket, you need to pay 30% tax on short term capital gains.
- Redemption >= 3 Years: Capital gains arising after 3 years from the date of purchase are treated as long term capital gains and are taxed at 20% with indexation.
Also Read: Which are the best Diversified / hybrid mutual funds to invest in India now?
5 Best Income Mutual Funds to invest in 2016
Conclusion: These income mutual funds are good for high tax bracket individuals and who are willing to take some risk. This would be good alternative to fixed income options like bank FD or corporate FD’s.
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Best Income Mutual Funds to invest in 2016
- 10.5% Muthoot Mercantile NCD December 2023 – Issue Details and Review - November 26, 2023
- 8.6% Cholamandalam Investment and Finance NCD Nov-2023 – Issue Details and Review - November 25, 2023
- 12.5% ICL Fincorp NCD November 2023 – Issue details and Review - November 24, 2023
I am currently investing in the below funds. Kindly suggest is this a good idea on investing in foreign currency
Mirae Asset China Advantage-Reg(D) – Re-investment – 1000
Reliance Japan Equity Fund-(D) – Re-investment – 1000
Religare Invesco Pan Eur Eq Fund-Reg(D) – Re-investment – 1000
Religare Invesco Pan Eur Eq Fund-Reg(G) – 1000