Best Debt Mutual Funds In India 2020 | Top Performing Debt Mutual Funds

Best Debt Mutual Funds In India

Now a day, the best investment option is a debt mutual fund because it is an excellent investment option than Bank FDs and it can also be considered a better alternative than Real Estate Investment. Debt Mutual funds offer better interest rates rather than some other investing options. We have presented the Best Debt Mutual Funds in India 2020 in this article. You can easily choose most suitable Debt Mutual Funds on the basis of their performance.  

Usually people invest in saving accounts or FDs through which they obtain below average return but now you have a better option i.e. mutual funds. The main purpose of this facility is security of assets and generation of income. Suitable mutual funds provide return 10 to 12% to the customer. They provide various investment options along with multiple benefits.

Best Debt Mutual Funds In India 2020

  1. Ultra Short Term Debt Mutual Funds
  2. Short Term Debt Mutual Funds
  3. Gilt Short Term Mutual Funds
  4. Income Mutual Funds
  5. Gilt Medium and Long Term Funds
  6. Dynamic Bond Funds
  7. Credit Opportunities Fund

Ultra Short Term Debt Mutual Funds

The most suitable mutual fund for the purpose of safety is Ultra Short Term Debt Mutual Funds. The minimum maturity of these mutual funds is 3 months and maximum is 3 years. It is most suitable for moderate investors. It is advised to user to invest you money in Ultra Short Term Debt Mutual Funds at least 6 to 9 months. Then you will obtain high interest rate.

Fund name Birla Sun Life Floating Rate Fund – Long Term Plan IDFC ultra short term plan
Modified duration 1.28 1.03
Average maturity 1.56 1.24
1st year return 9.70 % 8.87 %
3rd year return 9.39 % 9.01 %
5th year return 9.58 % 9.34 %

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Short Term Debt Mutual Funds

If you are looking for short – term investment plan for getting higher interest rate then Short Term Debt Mutual Funds are the best options for you. It is most suitable for low to moderate risk investor. It provides you facility the maturity is allowed from 6 months to 6 years. We are presented the Birla Sun Life Floating Rate Fund – Long Term Plan and Escorts short term debt fund details which are the best short term debt funds.

Fund name Birla Sun Life Floating Rate Fund – Long Term Plan Escorts short term debt fund
Modified duration 2.45 0.42
Average maturity 3 0.42
1st year return 10.46 % 8.14 %
3rd year return 10.08 % 9.54 %
5th year return 9.79 % 9.80 %

Read Also – How To Open A Mutual Fund Account In India

Gilt Short Term Mutual Funds

These are the only funds which come under government securities. So it is best for the security purpose because they are 100% risk free. The maturity of this these bonds are 2 years to 5 years. You can choose your funds as per your requirement because they are no credit risk in such types of mutual funds.

Fund name SBI Magnum Gilt Fund IDFC Government Securities Fund – Short Term Plan 
Modified duration 2.34 2.37
Average maturity 3 2.92
1st year return 12.95 % 10.20 %
3rd year return 11.63 % 10.66 %
5th year return 10.49 % 10.15 %

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Income Mutual Funds

It is the best option for those who love to manage highest risk because they carry high risk as per change in interest rates. Generally, who has an ability to track interest rate movements may choose Income Mutual Funds. The most suitable time for investing in such funds is that when interest rates have touched the peak and are poised to reduce. The maturity of these funds varies from few months to around 17 years.

Fund name HDFC Medium term opportunities fund ICICI Pru Banking And PSU Debit Fund
Modified duration 2.69 3.44
Average maturity 3.37 4.58
1st year return 10.92 % 12.63 %
3rd year return 10.15 % 10.62 %
5th year return 9.67 % 9.91 %

Check Also – How To Choose A Best Mutual Fund

Gilt Medium And Long Term Funds

These are the funds that primarily invest in medium to long term government Bond. Therefore, default risk and credit rating risk will be minimum. However, allowing their highest average maturity values, these funds prone to uppermost interest rate instability.

Fund name SBI Magnum Guilt Fund – Long Term Plan L&T Guilt Fund investment plan
Modified duration 7.05 8.03
Average maturity 11.68 15.26
1st year return 16.13 % 16.36 %
3rd year return 14.64 % 13.70 %
5th year return 11.90 % 12.50 %

Know About – Rights Of A Mutual Fund Investor 

Dynamic Bond Funds

These funds invest in debt securities of various maturity profiles and they manage the portfolio which varies dynamically as per interest rate of the fund administrator. These funds have holds long-term debt securities. It is quiet difficult for individual to track the debt securities. The investment of funds gets executed for all categories of debt and money market instruments with no top or floor on maturity along with what period it take, and what type of instrument to be focused on.

Fund name ICICI Prudential Long Term Fund UTI Dynamic Bond Fund
Modified duration 6.2 6.6
Average maturity 10.76 11.38
1st year return 16.56 % 14.80 %
3rd year return 14.06 % 12.25 %
5th year return 12.23 % 10.99 %

Read Also – How To Buy & Sell Mutual Funds In India

Credit Opportunities Fund

One of the biggest advantages of these funds is that that offers better return to clients. For the sake of producing high yield these funds acquire credit risk. As the credit rate low, the returns will high. Generally, they invest in low credit rated funds like less than or equal to “AA” rated.

Fund name DSPBR Income Opportunities Fund Kotak Income Opportunities Fund
Modified duration 2.43 2.48
Average maturity 3.08 3.11
1st year return 10.82 % 10.73 %
3rd year return 10.38 % 10.26 %
5th year return 9.60 % 9.56 %

Check Also – Top 10 SIP Mutual Funds

Some Important Points Must Consider Before Investing In Debt Mutual Funds

Must Know About Credit Risk-

Debt Mutual Funds invest into treasury bills, government securities, Certificate of Deposits (CDs), Commercial Papers (CPs), securities (bonds), money market instruments and some more. The credit nature of these hidden instruments is measured as far as appraisals.

Generally people consider that higher is the rating lower will be risk which is misconception actually. Assume, a person holds a mutual fund of XY and credit rating agencies presents its rating AA which is highest. But it is not permanent because if the finance XY of the organization changes then your rating may also changes.

Modified Duration-

We can say that Modified Duration is a measurement of a bond’s sensitivity with the help of which we can check the movements of interest rates. For example if the debt mutual fund with the modified duration of 3.1% that means the interest rate moment is 1% and the fund will undergo the movement of 3.1%.

About Average Maturity-

Higher the average maturity higher will be the interest rate. If you purchased mutual fund then its portfolio possess number of bonds and each bond consist different maturity date. Remaining time period of repayment is called Average Maturity.

About Exit Load-

There are some categories of mutual funds is also available that may change your exit load. A smart investor always checks all relevant details before investing. So be vigilant when your select the best option for you.

Before investing, a person must set the target amount and asset allocations. There are two options available for deciding the how much you should invest, first one is SIP throughout the goal period and the second one is fixed percentage of goal period. Then you can easily decide which suits you most.


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