Best Canara Robeco Debt Mutual Funds

Canara Robeco Mutual Fund began as a joint venture between the Canbank Mutual Fund and Robeco Group N.V., a Dutch asset management company. Incorporated in 1993, this mutual fund house is also one of India’s oldest AMCs. As of March 31, 2021, Canara Robeco Mutual Fund managed total assets worth roughly Rs.28241 crore.

This asset management company has more than 20 mutual fund schemes for its investors. These MF schemes include the best Canara Robeco debt mutual funds, among numerous other debt and equity MF plans.

However, before one proceeds to park money into any debt mutual fund scheme, it is best to develop a basic idea about it. 

Debt funds are a type of mutual fund scheme that invests predominantly in fixed-income securities. Accordingly, the top Canara Robeco debt mutual funds allocate assets in an array of money-market instruments. 

Debt instruments comprise treasury bills, commercial papers, debentures, corporate bonds, and government securities, among others. They come with a pre-decided interest rate and maturity period.

Furthermore, investors of the best Canara Robeco debt mutual funds 2023 receive yields based on the interest earned by them. As a result, debt funds are also called fixed-income funds. 

Like any other mutual fund investment, investing in debt funds has its share of pros and cons, depending upon the type of plan. Upsides of debt MFs include more flexibility, higher liquidity, and stable earnings. Moreover, as they invest in fixed-income avenues, debt funds are generally less volatile than other aggressive investment tools, like equity MFs.

On the downside, debt mutual funds deliver lower returns as compared to other MFs, such as their equity counterparts. 

Canara Robeco offers more than 8 schemes under its category of debt mutual funds. This AMC’s investment portfolio comprises long and short-term options of debt fund schemes.

Taxability

However, prior to investing in the best Canara Robeco debt mutual funds, investors must have a concrete understanding of their tax treatment.

Long-term Capital Gains Tax (LTCGT): Debt MFs redeemed after a holding period of 3 years are subject to a Long-term Capital Gains Tax. LTCGT is applicable at a flat rate of 20% on Long-term Capital Gains along with the indexation benefits. 

Short-term Capital Gains Tax (STCGT): When investors sell units of their debt MF before a holding period of 3 years, the gains are added to their taxable income. Moreover, the applicable tax on such Short-term Capital Gains depends upon an investor’s income slab. For instance, an investor falling under the 10% income slab is liable to pay taxes at 10% as STCGT along with cess and surcharge. 

TDS: When investing in the best Canara Robeco debt mutual fund, investors must note that tax deducted at source does not apply to debt funds in general. 

Factors to Consider Before Investing

Alongside taxation, it is wise to consider a number of parameters before investing in any of the best Canara Robeco debt mutual funds.

Investment objective: When investing in debt MFs, it is critical to determine your investment objectives. Thereafter, you can choose a plan that aligns with your goals and the timeframe within which you wish to accomplish them.

Duration: Debt mutual funds tend to be more sensitive to interest rate movements. In fact, the price of fixed-income securities is inversely related to interest rates. To elaborate, debt funds with a longer duration are more vulnerable to fluctuations in interest rates and vice versa. Hence, investors must pick a suitable time horizon that helps them achieve their financial goals without aggravating the impact of interest rate fluctuations on returns. 

Expense ratio: Every asset management company levies a fee for its portfolio management services. This charge, known as the expense ratio. It is a percentage of aggregate expenses that are borne by investors. 

Credit risk of constituents: Credit rating agencies in India evaluate the creditworthiness of issuers of fixed-income instruments. Based upon this analysis, debt securities receive a rating. For example, securities with an ‘AAA’ rating tend to carry low credit risk. Conversely, securities with a ‘C’ rating carry a higher risk of default.

Assets under management: AUM is the market value of investments held by a mutual fund house. Therefore, a debt MF with larger assets under management or a higher AUM can better spread fixed expenses across its investors more minimally.  

Risk appetite: Although debt mutual funds are less prone to market risks, they can be vulnerable to inflation and credit risks. So, it is necessary to ascertain your risk appetite before investing in any of the best Canara Robeco debt mutual funds. 

Prevailing interest rate regime: Under a falling interest rate regime, previously issued bonds are valued higher compared to freshly issued ones. Similarly, with a rising interest rate regime in place, the value of freshly issued bonds increases. Moreover, as debt funds invest in bonds, they generally perform during a falling interest rate regime.