Best Quantum Debt Mutual Funds

In December 2005, Quantum AMC was established, surpassing ten years in the mutual fund business.  As of 2021, they have an AUM of Rs.24,65,338.68 crore spread across debt, equity, and hybrid mutual funds. Quantum Mutual Funds has approximately 10 mutual fund offerings in total. 

In the debt mutual fund segment, Quantum AMC has less than five offerings. These options have a combined AUM of Rs.660 crore approximately. The best Quantum debt mutual funds cover short-term debt MFs like liquid funds and mixed allocation varieties like dynamic mutual funds. 

Debt mutual funds are a comparatively low-risk investment vehicle. They suit objectives of wealth preservation and stable income generation. Securities and Exchange Board of India defines debt mutual funds as those schemes that invest primarily in bonds and other debt-related securities. 

Based on the classifications offered by SEBI, there are various types of debt securities. The subcategories created with respect to tenure are short-term, medium-term, and long-term. Further, based on the issuer of the bonds, there are corporate bond funds, treasury bond fund, gilt funds, etc. 

Quantum AMC spreads the best Quantum debt mutual funds over short-term funds like liquid funds and dynamic mutual funds. 

Firstly, liquid funds are a category of funds that have lower interest risk. Their underlying securities come with a maturity period of 91 days, allowing for quick liquidation with no exit loads. A liquid fund offers better interest rates than a savings bank account, making it a better instrument for the short-term deposition of money. 

Secondly, dynamic mutual funds have underlying securities with varying maturity periods. Since debt mutual funds are inversely tied to any change in the interest rates, a long maturity period exposes them to a higher interest risk. A dynamic mutual fund minimises this risk and provides higher returns by choosing securities with varying maturities. Apart from these, there are other debt mutual fund types, such as ultra-short duration funds, money market funds, overnight funds, etc. 

Taxability

When an individual sells units from any of the best Quantum debt mutual funds, they may earn capital gains. Capital gains are subject to taxation depending on the duration held. SEBI stipulates that for capital gains from debt-based mutual funds to be classified as short-term, they should be redeemed within three years. Redemption after that, and the gains fall under long-term capital gains. 

Short term Capital Gains Tax: These capital gains are added to a person’s income and taxed at normal rates at which the individual is liable to incur it. 

Long-Term Capital Gains Tax: LTCG is taxed at 20% with indexation for debt-based mutual funds. Without indexation, the rate is 10%.

In both cases, however, there is an applicable surcharge and cess at 4%. 

Apart from taxation, investments are also subject to risk. Even the best Quantum debt mutual funds are not risk-free and require investor discretion before investing. 

Factors to Consider Before Investing

Some factors to consider before investing in the best Quantum debt mutual funds are expense ratio, interest rate risk, exit load, etc. 

Interest rate risk: Bonds and other debt securities are inversely related to the prevailing interest rate. When the interest rate goes up, existing bond values decrease; when they fall, bond values go up. 

Hence, debt mutual funds, composed of bonds and other debt securities, are prone to fluctuations in value with change in the interest rate. Therefore, investors tend to opt for bond markets in a regime of higher interest rates. 

Duration: Investment in the best Quantum debt mutual funds 2023 depends heavily on the maturity period of underlying bonds. Longer the maturity period of the bonds, the greater the exposure to interest risk. Interest rates tend to change dramatically over a short period even. 

Expense Ratio: Every fund requires management in the form of a manager and various brokers. The AMC charges an expense ratio to finance this fund management. When calculating returns, an individual will need to subtract the expense ratio from the return rate. A larger expense ratio implies the cost of fund management per investor is greater. 

Participation in fund: The greater the number of people participating in a debt mutual fund, the greater is the asset under management. A larger asset base means more people can share fund expenses. Moreover, a larger asset base also gives a substantial advantage in negotiating with bond issuers. 

Risk appetite: Individuals may invest in any of the best Quantum debt mutual funds after considerable personal risk appetite assessment. Debt mutual funds tend to have lower risk in comparison to equity ones. However, they are not risk-free. They are subject to credit, inflationary, and interest rate risks. Individuals should assess the applicable risks in all categories of debt mutual funds before taking the plunge.

In conclusion, investing in the top Quantum debt mutual funds is not a light decision. Prudence and analysis are vital before any investment. Most investors view debt mutual funds as low-risk investment options for wealth creation. There is also considerable safety if funds invest in highly rated debt securities.