I am looking to invest Rs 5L in mutual funds. My friend recommended investing lumpsum in debt funds. Can you please suggest good debt funds to invest?Asked
Some of the parameters for choosing the best debt funds an investor must consider are:
2. Past Returns
3. Expense Ratio
4. Assets Under Management
5. Fund Manager Experience
6. Portfolio Holdings
Every investor has different preferences and abilities when it comes to risk taking, investment size, duration of investment etc. Keeping these factors in mind the best debt funds available may vary from investor to investor and each fund may cater to a particular type of investor.
We have prepared a list of some of the best debt funds of 2017. Please keep in mind this list does not include all the debt funds but only a few number of schemes, there may be more debt funds which have performed equally well in various parameters.
1. ICICI Prudential Gilt Fund
The fund is 15 years old and has zero exit load. It has given annualized return of 10.36% in the last five years.
2. SBI Magnum Gilt Long term
The fund is 10 years old with a slight increase in the risk level it has given annualized return of 11.59% in the last 5 years.
3. Axis Income Fund
Launched in 2012 with low risk level, it has given annualized return of 9.31% since inception.
4. Reliance Monthly Income Plan
The fund is 10 years old with risk on the higher side. It has given annualized return of 10.62% in the last 5 years.
You can invest a lump sum amount in any of these funds by clicking here
Lump sum Investments in debt funds depends on the risk taking ability of the investor and duration for which he is looking to invest. Various debt funds available for investment are liquid funds, short term funds and ultra short term funds
An investor can use liquid funds to park his money while earning good returns and at the same time ensuring liquidity (ease with which an investment can be turned back into cash). Liquid fund that you can consider is: Kotak Floater- Short term
Short term funds:
Ultra short term funds:
For investment lumpsum amount in debt funds, it is wise to invest for shorter duration with easy liquidity. This is will reduce the risk of change in interest rate as well as give better return than parking in fixed deposits(FDs).
These are some good debts funds you can choose for investment:
1. Short term funds:
If you want to invest for a shorter duration, say for 3-6 months, then these are best debt funds for you to invest in. Short term funds invest in papers like Commercial Paper(CPs) and Certificate of Deposit(CDs).
These are short-term fund you can consider:
2. Liquid Funds:
As the name suggest, these are the debt funds which can be easily converted in to cash that too within a day time. Liquid funds invest in highly liquid money market securities like Commercial Paper(CPs), Treasury Bills and Certificate of Deposit(CDs). They invest in instruments with a maturity period of up to 91 days. Among all debt funds, liquid funds provide most stable returns. Liquid funds are best suited investors having surplus amount lying idle in savings bank account and are intent to get better returns.
These are liquid fund you can consider:
3. Ultra Short Term Funds
Ultra short-term funds invest in fixed-income instruments which are mostly liquid and have short-term maturities. They have higher return and slightly higher risk than liquid fund
This is ultra short fund you can consider:
You can diverse your portfolio by investing in some all of the above as per your investment goal.
It is a good decision to invest lumpsum in debt funds. There are multiple type of debt funds and you can choose depending on the duration and risk you are willing to take.
Liquid funds are the debt funds with the lowest risk. They typically give better returns than FD and you can withdraw anytime. You can invest for very short duration as well - even for just a week. You can use liquid funds to park you money or money for emergency plans.
Here is a liquid fund you can consider - Kotak Floater - Short Term
Ultra Short Term Funds
Ultra Short Term (UST) Funds are low risk funds with higher returns than liquid funds. They carry slightly higher risk than liquid funds. They are ideal to invest for 1 to 3 years with very good returns (much better than FD). Here is an example of UST fund - Franklin India Low Duration Fund
Short Term Funds
Short term funds are similar to ultra-short term investments but with a duration of approximately three years. If your goals are to manage expenses while buying a house or planning a marriage within one to three years, then this category can help you with decent returns without any risk factors. You can consider - HDFC Short Term Opportunities Fund
If you are investing 5L, you can distribute your money couple of debt funds (like the ones above) to get better than FD (fixed deposit) returns.