Which Debt Mutual Funds have Good Returns?

A debt fund commonly known as a fixed income fund is a mutual fund scheme that invests in fixed income instruments like corporate bonds, Government Bonds, corporate debt securities, and money market instruments for the purpose of capital appreciation. It is also a major advantage of investing, as being low-cost, will give out returns that are relatively high, have more liquidity, and reasonable safety. These funds are an ideal type of fund for investors who look forward to regular income but are risk-averse. 

They are less volatile and less risky when compared to equity funds. If you have been saving in a traditional method like a Bank deposit, a fixed deposit savings account, and more and are looking for steady returns with low volatility, then an investment in this fund would be a good choice. They help you achieve your financial goals in a more tax-efficient manner and in order to help you better turn.

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Should you be Investing in a Debt Fund?

Are you risk-averse or not ready to have equity exposure? A debt fund would help you grow well with little to no risks at all. Along with that, you can even gain more on the regular income. An investor usually stays invested in debt funds for a short-medium time horizon. But the main challenges arise with selecting the appropriate type of fund as per your investment Horizon. Liquid funds will be more suitable for a short-term investment, and it would generally work like his or her surplus funds in a savings bank account, and in a similar way, the features vary for each investor.

The Risks Associated

Debt funds do possess a certain amount of risks, you can take a look at them here

Credit risk It is when the borrower might miss repaying the interest to the investor on the committed date and time. 

Interest rate risk It is also the possibility of movement with the interest rate offered by the underlying securities of the fund plan. 

Liquidity risk This is a possibility of mutual fund houses not having sufficient levels of liquidity to cater to the redemption request.

For an overview, here are some debt funds that can give you a clear picture

  • DSP World Gold Fund

This is an open-ended fund scheme investing in the world gold fund, and it seeks to provide long-term capital growth by investing in units of overseas funds that primarily invest in equity securities of gold mining companies. This scheme predominantly invests in BGF-WGF.

It was launched on the 14th of September 2007 by DSP Mutual Fund. The minimum reduction amount of this scheme is rupees 500 and further, the reduction process is dispatched within 5 to 10 business days of receipt of a valid redemption request. There is no entry load on the scheme, but it does carry a certain amount of exit load.

  • Edelweiss Government Securities Fund

Edelweiss government securities fund is also an open-ended debt scheme that invests in government securities across various durations. It aims to generate income over medium and long-term investment horizons and also it invests in state government securities, units of liquid schemes, and units of schemes primarily investing in government securities. It allows investors to regenerate returns at minimal risk, and the scheme invests in government securities where the returns are considered to be minimal and with average category returns.

  • Nippon India Nivesh Lakshya Fund

This fund is a debt mutual fund scheme that was launched by Nippon India mutual fund. It was made available to investors on the 6th of July 2018, and the minimum SIP investment is set to rupees 100. The minimum lump sum investment is rupees 5000. It seeks to generate optimal returns consistent with moderate levels of risk with Income that may be complemented by a capital appreciation of a Portfolio.

  • IDFC Government Securities Investment Plan

IDFC government securities investment plan is a debt mutual fund scheme that was launched by IDFC Mutual Fund. It is a scheme that was made available to investors on the 1st of January 2013. This fund is rated as a moderate-risk fund. It has the minimum SIP investment set to rupees 1000 and the minimum lump sum investment set to rupees 5000. It seeks to generate a reasonable return with high liquidity through investments in government securities across maturities. The fund is a mix of short-duration debt instruments and bonds securities along with money market instruments.

  • ICICI Prudential Constant Maturity Gilt Fund

ICICI Prudential constant maturity gilt fund is a debt mutual fund scheme launched by ICICI Prudential mutual fund. It is a scheme that was made available to investors on the 12th of September 2014. It is rated as a moderate risk Fund with a minimum SIP investment of rupees 1000 and a minimum lump sum investment that is set to rupees 5000. It also seeks to generate income primarily by investing in a portfolio of government securities while maintaining the Macaulay duration of the portfolio.

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As an investor, there are certain things you should consider while investing in a debt fund. You can evaluate what would be the best debt mutual fund for you with certain metrics such as fund return, fund history, expense ratio, and financial ratios. Debt funds are not influenced a lot by the market movements, which leaves you in a safe space to invest. It gives you a stable portfolio along with diversifying your existing portfolio. It is also known as one of the best types of mutual fund for the first time investor who is seeking to make some gain. Since these funds are highly liquid, you can consider investing your surplus money in that and earn much higher returns than a regular savings bank account.