Best Baroda Pioneer Debt Mutual Funds

Baroda Mutual Fund is a wholly-owned subsidiary of the Bank of Baroda. It serves the asset management needs of investors through a range of equity, debt, and money market products. Per the latest figures, this AMC has nearly Rs.10000 crore in assets under management. 

Baroda Mutual Fund offers over 19 mutual fund schemes, including equity, hybrid, liquid, and the best Baroda debt mutual funds. 

A debt fund predominantly invests in fixed-income instruments that offer moderate capital appreciation. It includes treasury bills, corporate bonds, gilt funds, liquid funds, corporate debt securities, government bonds, and other money market instruments. These instruments are not affected by fluctuations in the market and are, therefore, considered low-risk investments. 

Baroda Mutual Fund offers more than 5 different debt mutual fund schemes to choose from.

Debt funds have relatively stable returns, high liquidity, reasonable levels of safety, and low-cost structures. They usually work best for investors looking for regular income but are risk-averse. The best Baroda debt mutual funds are less volatile and risky than equity funds but offer lower returns in the long run. They provide better returns compared to traditional fixed-income sources like FD and RD, though they are riskier. 

Debt funds come in various types, depending on their asset allocation, risks, and maturity period of underlying securities. There are overnight, liquid, ultra-short, short, low, medium-long, and long duration funds based on the maturity period. The funds with a shorter duration have the lowest risk profiles, while the longer ones usually offer better returns. 

Other types to consider from the best Baroda debt mutual funds include money market, corporate, gilt funds, and fixed maturity plans. These invest in different assets like money market instruments, corporate bonds, government securities, and fixed-income securities. Credit risk funds invest in bonds of issuers with a poor credit rating. As the name suggests, they involve significant default risks, but they also offer better returns than most other fund types.  

Taxability

Taxability is another major factor to consider before deciding on the top Baroda debt mutual funds. The capital gains from debt funds are taxable at a rate based on the holding period. 

Long-term Capital Gains Tax: LTGC applies to gains realised from selling units of a debt MF after three years. These are taxed at a fixed 20% rate after indexation. 

Short-term Capital Gains Tax: Proceeds realised from liquidating investments before the 3 year-mark are categorised as short-term capital gains. These are added to an investor’s overall income and taxed per the appropriate tax bracket. 

TDS: TDS is not applicable to debt funds.

Factors to Consider Before Investing

Before choosing the best Baroda debt mutual fund, it’s imperative to consider some essential points. These include:

Returns: A debt fund gains income from its bond holdings or a change in NAV because of a shift in bond prices and interest rates. The type of securities held by a fund highly influences the interest and capital gains from it. Funds with long-term bonds show a higher increase in Net Asset Value when the market interest rates fall compared to short-term bonds. On the other hand, debt MF schemes with investments in short-term bonds manifest limited losses when interest rates rise. 

Risks: Debt funds carry the least risks among all mutual fund types. However, even the best Baroda debt mutual funds are market-linked products and have no guaranteed returns. Credit risks can happen due to the possibility of default on payments by bond issuers. The type of fund influences the chances of value erosion. Interest rate risks are more common and depend on market interest rates, which are out of a fund manager’s control. 

Financial goals: Different financial requirements influence the type of debt fund an investor may choose. For instance, liquid funds are an effective solution for short-term requirements. Those who need to access their funds frequently can opt for funds with a shorter duration, while long duration funds may favour a mid to long-term horizon. 

Maturity period: The average maturity period of a debt fund’s constituents greatly affects its returns. The lower this period is, the lower is its volatility and returns. Short-term bonds with a tenure of three to six months have high liquidity and offer more stable returns. Those with investments in securities featuring a longer Macaulay duration offer better returns against significant risks. Hence, this is an essential consideration when selecting the best Baroda debt mutual funds.

Costs: AMCs charge a fee for annual maintenance, allocation charges, commissions, etc., called the expense ratio. A lower expense ratio usually hints at improved chances of realising greater returns. Conversely, a higher expense ratio means a more significant deduction from the generated returns. Hence, when comparing Baroda debt mutual funds, consider their expense ratios alongside other factors. 

Conducting proper research on the above factors will make it easy for investors to choose from the best Baroda debt mutual funds in 2023.