Looking to invest in debt mutual funds which have delivered higher returns than your fixed deposit schemes? Well there are at least 116 such plans with superior income on investments but we have picked the top five for you.
In debt MFs, returns up to 1 year are simple annualised as against equity mutual funds where returns up to one year are absolute.
While interest rates on fixed deposits vary from bank to bank, a standard annualized rate of 8% per annum has been taken as the benchmark. Five debt MFs which have given higher returns are:
The DSP Credit Risk Direct Plan(G) has given an annualised 1-year returns of 17.18%. This fund is a mix of high yielding and lower-rated debt securities and it invests in debt instruments across different credit ratings, with at least 65% in AA and below rated securities. The total Assets Under Management (AUM) stood at Rs 205.15 crore as on January 31, 2024 while the net asset value (NAV) as on February 27 stood at Rs 42.56%.
The 1-year annualised returns delivered by Invesco India Credit Risk Fund(G)-Direct Plan stands at 13.60%. The average AUM at the December ended quarter stood at Rs 139 crore with NAV reported at Rs 1878.44 as on February 27. The fund invests in corporate debt securities of varying maturities across the credit spectrum and its investments are in corporate bonds rated 'AA' or below.
3) DSP Strategic Bond Fund(G)-Direct Plan
The 1-year annualised returns given by DSP Strategic Bond Fund(G)-Direct Plan stand at 11.32%. This fund invests in high-quality government and corporate debt securities with 100% investments in AAA or higher rated instruments. One of DSP's oldest debt funds with a 14 year+ track record, it is a highly liquid portfolio with actively managed portfolio duration based on future interest rate movement predictions.
The AUM as on January 31, 2024 stood at Rs 911.74 crores while the NAV as on February 27, 2024 was Rs 3,039.78.
SBI Long Duration Fund(G)-Direct Plan
The 1-year annualised returns given by SBI Long Duration Fund(G)-Direct Plan stand at 11.15%. The NAV as of February 27, 2024 is Rs 11.25 for Growth option of its Direct plan while the AUM as on January 31, 2024 stood at Rs 1227.31 crore. It is an open-ended debt scheme investing in instruments such that the Macaulay duration of the portfolio is greater than 7 Years.
HDFC Long Duration Debt Fund(G)-Direct Plan
The 1-year annualised returns given by HDFC Long Duration Debt Fund(G)-Direct Plan stand at 10.86%. This is also an open ended debt scheme investing in instruments such that the Macaulay Duration of the portfolio is greater than 7 years. The scheme was launched in January 2023. The AUM as on January 31, 2024 stood at Rs 1,738.27 crore while the NAV at Rs 11.11.
While most FDs offer 6 to 7 percent interest, debt mutual funds deliver anywhere between 7-8 percent return in one year. Tax treatment: When seen from the tax treatment's perspective, the difference ceased to exist when in Finance Act 2023, indexation benefit of long-term debt mutual funds was phased out.
While Fixed Deposits offer stability, Mutual Funds provide the potential for higher returns, crucial for beating inflation and achieving long-term financial goals.”
Unlike Equity Funds, Debt Funds are considered low risk and are ideal for conservative investors seeking stable returns. They offer liquidity, ease of investment and diversification across various debt instruments. However, Debt Funds are subject to interest rates and credit risk.
Other alternatives to FDs, like the PPF scheme and the NSC, also offer the same benefit. Tax benefits for alternatives to FDs differ from scheme to scheme.
The U.S. stock market is considered to offer the highest investment returns over time. Higher returns, however, come with higher risk. Stock prices typically are more volatile than bond prices.
If you invest Rs. 5,000 per month through SIP for 5 years, assuming 12% return. The estimate total returns will be Rs. 1,12,432 and the estimate future value of your investment will be Rs. 4,12,431.
One advantage of debt financing is that it allows a business to leverage a small amount of money into a much larger sum, enabling more rapid growth than might otherwise be possible. Another advantage is that the payments on the debt are generally tax-deductible.
Fixed deposits function similarly – Banks deposit money and provide interest until maturity. Debt mutual funds also work on this principle only, except they pool investors' money into various bonds via the MF (mutual fund) scheme.
Tax Efficiency: Liquid Funds are more tax-efficient than FDs, especially for individuals in higher tax brackets. The indexation benefit may also apply to long-term Liquid Fund investments, further reducing tax liabilities.
RDs give stable returns that may match inflation rates at best. Debt funds generally offer slightly higher returns, that may at times beat inflation rates.
Hobby: Reading, Ice skating, Foraging, BASE jumping, Hiking, Skateboarding, Kayaking
Introduction: My name is Cheryll Lueilwitz, I am a sparkling, clean, super, lucky, joyous, outstanding, lucky person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
