Best 360 One Debt Mutual Funds

IIFL is a global asset management company that is a part of IIFL Holdings Limited. The AMC was established in 2011 in India. They introduced the concept of benchmark agnostic mutual funds. Today, they offer various financial and active portfolio management solutions with total assets under management worth over Rs.2600 crore. 

IIFL provides more than 3 mutual fund schemes, including equity, liquid, and the best IIFL debt mutual funds with direct and regular plans.

Debt funds are MF schemes that invest a majority of their assets in fixed-income instruments like corporate bonds, government securities, money market instruments, treasury bills, etc. All these instruments have a pre-decided maturity and interest date, which are not usually affected by fluctuations in the market. This makes them considerably less volatile, ensuring steady income and capital appreciation. 

IIFL offers more than 2 debt fund schemes comprising dividend and growth plans and dividend reinvestment and pay-out options. 

Debt funds minimise risks by investing in the least risky investments. They earn money through income from interests owed by corporations or government entities issuing securities. The best IIFL debt mutual funds have a low-cost structure, stable returns, high liquidity, and the highest safety among mutual funds. 

There are various choices of debt funds with different maturity periods and debt securities to suit every need of investors. Overnight funds, ultra-short duration funds, and liquid funds have the shortest maturity periods. Thus, interest rate movements don’t affect them much. On the other hand, debt funds like short, medium, and long duration funds provide better returns over a long time against higher interest rate risk. 

The best IIFL debt mutual funds can also vary depending on the debt instruments and their credit risks. For instance, gilt funds invest only in government securities and corporate bond funds that invest in AAA-rated corporate bonds. Resultantly, have very low risks. However, credit opportunities funds try to seek higher returns by investing in riskier low-rated bonds. Other debt funds include dynamic funds where the fund manager keeps changing the portfolio per interest rate regimes. Lastly, fixed maturity plans are debt funds that invest in corporate and government securities with a fixed maturity period.

Factors to Consider Before Investing

There are certain parameters investors need to be aware of before investing in the best IIFL debt mutual funds 2023. 

Risk: The best IIFL debt mutual funds carry the lowest risk among mutual funds, but their value can vary depending on interest rate regimes. This is nowhere as drastic as share price movements, making debt funds significantly safer than equity or hybrid funds. However, few debt funds may carry credit risks if their assets have low credit ratings. Others carry interest risks where the returns fall due to an increase in interest rates in the economy. 

Expected returns: Debt funds provide safe and steady returns but have very low capital appreciation. They offer lesser returns than hybrid or equity funds but more so than fixed deposits. They provide a safe method of earning a moderate income with low volatility and high liquidity. However, the net asset value (NAV) of the top IIFL debt mutual funds falls or climbs premised on interest rate movements.

Credit rating of issuers: Credit rating agencies like CRISIL accredit bond issuers premised on their repayment capacity. A company that’s less likely to default is rated highly, while enterprises with shakier chances of repaying are rated poorly. This rating usually ranges between AAA and D, with the former and latter denoting the most and least likely to repay, respectively. If the issuer defaults on repayment, the NAV of a related fund will take a hit. However, low-rated bonds can deliver significant returns. 

Investment horizon: Fixed-income funds invest in a variety of securities with different maturity periods. Ones with a shorter maturity period, like 1 day, 91 days, etc., offer low to moderate returns but do not involve any significant risk. Those with longer maturity periods offer modest returns but feature moderate to high credit and inflationary risks. Hence, investors may want to assess this parameter when selecting the best IIFL debt mutual funds. 

Expenses: Fund houses levy a charge on investors to account for fixed and variable costs of managing a scheme. They include a fund manager’s salary, taxes, advertisement costs, brokerage charges, etc. Expense ratios have a direct impact on an investor’s take-home returns. Thus, when comparing the top IIFL debt mutual funds, individuals might consider this factor.  

Taxability

Investors must also factor in the taxes associated with debt funds prior to taking the plunge. 

Long-term Capital Gains (LTCG) Tax: Suppose an investor sells their debt MF units after holding them for 3 years. The profits they realise from such a transaction are considered long-term capital gains. The taxation rate for this is 20% after the benefit of indexation. 

Short-term Capital Gains (STCG) Tax: Investors realise short-term gains when they sell their units prior to 3 years. They need to add such a sum for a financial year to their taxable income. 

These are some of the essential parameters that investors need to do a thorough check on before selecting any particular scheme.