Best Invesco Debt Mutual Funds

Invesco Mutual Fund is a leading AMC in India, offering various products and instruments for investors. This US-based company has managed assets worth Rs.36,795.25 crore as of March 2021. This AMC houses more than 30 mutual fund schemes, including the best Invesco debt mutual funds. 

A debt fund invests in fixed-income generating securities such as corporate bonds, government securities, commercial papers, treasury bills, etc. The issuers of these money-making instruments pre-decide the maturity date and the interest rate an investor can earn on maturity. Market fluctuations do not affect these funds. Therefore, these instruments are low-risk investments compared to equity funds. 

However, it is vital to note that debt funds generate lower returns than their equity counterparts. Plus, the NAVs of such fund schemes fall with an increase in market interest rates and vice versa. That’s because the value of the underlying securities goes down when freshly issued bonds carry a higher interest rate, and reversely, it goes up when new bonds carry a lower coupon rate. 

Furthermore, these funds invest in several securities based on credit ratings. Evaluating these ratings, an investor can assess the chances of defaults in repayments. Therefore, a higher credit rating indicates lower chances of default and vice versa. Fund managers buy bonds of both low and high-credit-rated issuers, depending on the scheme type.

Usually, the best Invesco debt mutual funds that invest in bonds of low-credit-rated issuers promise higher returns and pose significant risks. Conversely, Invesco debt mutual funds with investments in high-credit-rated companies offer stable, risk-free returns. 

In addition to this, debt funds have a range of advantages and disadvantages that vary depending on their type, maturity periods of underlying instruments, and other factors.

Taxability

The best Invesco debt mutual funds in 2023 include approximately 10 schemes premised on the investment objective, risk, and duration. However, it is important to understand the taxability of these funds before making a choice. 

Long-term Capital Gains Tax: If you redeem your scheme after 3 years of investment, you will attract an LTCGT on your gains. The tax levied will be at the rate of 20% with indexation benefit and 10% without it. Indexation benefits will be valid as long as you stay invested in the top Invesco debt mutual funds.

Short-term Capital Gains Tax: You are liable to pay an STCGT on your returns with respect to your income tax slab if you sell the units before 3 years. For instance, if you fall in the 20% slab, you will need to pay 20% + 4% cess on short-term capital gains. 

TDS: Tax Deducted at Source does not apply to debt mutual funds. 

Factors to Consider Before Investing

Understanding taxability will help an investor make effective decisions regarding investment and liquidation. Apart from this, one can consider certain pointers before investing in the best Invesco debt mutual fund. 

Investment objective: It would be beneficial to have a clear idea of the objective of your investment to select an aligning scheme. This will help in shortlisting schemes and reaching financial milestones more conveniently. Therefore, it is vital to set an objective prior to investing in the best Invesco debt mutual funds. 

Risk appetite: Although debt funds are less risky, they are potentially vulnerable to interest rate, credit, and inflation risks. Hence, you should assess your risk-intake capacity before settling for a scheme. 

Performance of the fund: A fund’s past performance indicates its trends under different bullish and bearish spells. Note that a scheme’s previous performance does not indicate how much returns you can receive in the future. However, reviewing it can hint at a scheme’s fundamental robustness. 

Holding analysis: You can consider checking the asset allocation of a scheme when researching. That way, the potential risk, and returns can be measured. For instance, a scheme with significant investments in AAA-rated bonds will yield lower returns but provide more stability and vice versa. On the other hand, debt funds primarily comprising securities with maturity periods above 3 years are susceptible to interest rate and inflation risks. Therefore, consider this factor before choosing the best Invesco debt mutual funds. 

Fund manager’s experience: A fund manager allocates your resources and investments with an aim to generate higher returns. This is only possible when the individual has thorough knowledge and experience in this field. Therefore, it is imperative to check a manager’s expertise prior to investing. 

Expense ratio: Every AMC, including Invesco, charges a certain amount on returns for the administration and management of mutual funds. This fee is expressed as a percentage. 

Exit load: An exit fee is charged by a fund house on withdrawing from a scheme partially or fully within the lock-in period. However, not all funds include an exit charge on ending the scheme before a stipulated duration. Therefore, it is advisable to note this point before investing. 

It is obvious that the selection procedure of the best Invesco debt mutual funds can be a tedious task. But, keeping a tab on the aforementioned points and understanding the basic concepts of mutual funds can make the process comparatively easier.