Best Axis Debt Mutual Funds

Established in 2009, Axis Mutual Fund is one of the largest asset management companies in India. It began operations as a joint venture between Schroder Singapore Private Limited (SSHPL) and Axis Bank. As of the quarter ending June 2020, this fund house manages assets worth Rs.1.34 lakh crore. 

Axis Mutual Fund offers more than 40 MF schemes. These investment options include hybrid schemes, equity schemes, and the best Axis debt mutual funds, among others.

A debt fund is a type of mutual fund that invests primarily in fixed-income securities. These distribute wealth in an array of money-market instruments, such as debentures, treasury bills, commercial papers, government securities, corporate bonds, among others.

These investment instruments come with a pre-decided maturity date and rate of interest. As a result, the yields received by debt MF investors depend upon the interest earned. Therefore, debt mutual funds are also called fixed-income funds.

Premised upon these features, an investment in debt mutual funds can have a number of benefits as well as drawbacks. The best Axis debt mutual funds 2023 tend to offer stable returns, high liquidity, and more flexibility. As debt funds invest in fixed-income avenues, they dilute the associated risks of investment.

Moreover, given that debt MFs are less volatile, investments in these funds are less risky than other aggressive investment tools, such as equity mutual funds. On the flip side, debt funds generally offer lower returns compared to their equity counterparts.

Axis Mutual Fund offers approximately 13 schemes under its category of debt funds. These plans include several short- and long-term options in their investment portfolio.

Factors to Consider Before Investing

When investing in any of the top Axis debt mutual funds, it is critical to have an elementary idea of a number of factors. A clear understanding of these parameters can assist prospective investors in making sound investment decisions. 

Investment goal: Prior to investing in the best Axis debt mutual funds, one must evaluate his/her objective of investment. Investors can select a scheme based on their financial goals and the timeframe within which they wish to accomplish them. 

Risk appetite: Mutual fund investments are subject to different types of risks. Therefore, it is essential to ascertain your tolerance for the same before investing. Generally, debt funds are less vulnerable to market risks but subject to interest rate, inflation, and credit risks. A fundamental understanding of the associated risks can help investors determine the best Axis debt mutual fund for them.

Past performance: It is vital to review the previous performance of any mutual fund before investing. Although past performance does not necessarily determine a scheme’s probable returns, it certainly offers valuable insights for investors to gauge future returns under similar market conditions. 

Expense ratio: Asset management companies levy an annual charge denoted in terms of percentage. It is charged to account for operating and administrative expenses an AMC incurs in managing a scheme, for instance, fund manager’s fee. This amount is deducted from the generated returns. For instance, let’s say that an investor realises approximately 6% returns from a debt MF and its expense ratio is 1.5%. Therefore, his/her final return will be 4.5%.

Exit load: Fund houses charge an exit load from investors if they divest from an MF scheme either fully or partially within a specific period. However, some schemes may not include any exit load. So, it is wise to scan through these aspects beforehand. 

Credit risk of portfolio constituents: Credit rating agencies in India examine the creditworthiness of issuers of fixed-income securities. Debt securities with a low credit risk receive an ‘AAA’ rating. On the other hand, securities with a high default risk receive a ‘C’ credit rating. Note that instruments with high credit rating deliver less significant returns than components with a poor rating typically. 

Assets under management: Debt funds with larger assets under management (or a high AUM) usually distribute fixed fund expense across their investors, with each person bearing a minimal load of such costs. A large fund size, therefore, signals a lower expense ratio per investor, which is also reflected in its returns.

Taxability

Alongside a comprehensive understanding of such aspects, it is also imperative to know about the taxability of the best Axis debt mutual funds. These funds are subject to two kinds of taxation based upon their holding period: STCG tax and LTCG tax.

STCG tax: When investors redeem their funds before 3 years, their gains are added to their taxable income and taxed as per their income tax slab rate. For instance, if an individual falls in the 10% income slab, they shall pay 10% tax + cess on their profits.

LTCG tax: Proceeds from debt mutual funds redeemed after a period of 3 years are subject to 20% tax along with indexation benefits.