5 Best Debt Funds To Invest In 2020

Often when companies and debt instruments want to raise funds, they invite investors to lend them money and in return, they offer a fixed amount of interest at regular intervals. This sort of financial arrangement is called a debt fund. A debt fund invests in securities according to their credit rating. These funds try to maximize returns by investing across several types of securities. There are several short term, medium-term and long term debt funds to choose from. No matter what kind of investment you are looking for, be it long term or short, entailing higher risk factors or absolutely risk-free, you are sure to get one as per your needs.

There are Dynamic Bond Funds, Liquid Funds, Gilt Funds, Fixed Maturity plans, Income Funds, etc. among several other debt funds. There are many such kinds, but the ones listed below are the top 5 debt funds you can choose from.

Debt funds are one of the best options for investors.

Source: atozfinanaceinfo.com

1.  SBI Magnum Medium Duration Fund

It is a debt fund whose essential aim is to generate decent returns by investing in debt securities. It has a moderate level of liquidity. In order to ensure regular payment, the fund generally invests in several short-term debt securities. The investment is short term with an average maturity period ranging from 3-4 years. The returns range from 7% to 11%. This debt fund calls for well-diversified credit risk which earns it a well-deserving place among the top debt funds with medium duration.

2.  Franklin India Liquid Fund

This debt fund invests in debt instruments that have a maximum maturity of 90 days. Its objective is to generate optimal returns teamed with high liquidity. Investors who are looking for investing their surplus funds in the hope of earning higher returns may opt for this scheme. Also, it is an established fact that bank returns do not yield as much as such debt funds. Despite its high returns, the portfolio is exposed to comparatively low risk as it is a mix of money market instruments and highly rated short-term debt securities. The interest rate ranges somewhere between 4% to 7.46% over different intervals of time.

3.  ICICI Prudential Ultra Short-Term Fund

It is a debt-scheme which is open-ended and primarily invests in instruments that have a maturity period ranging between 3 to 6 months. The scheme is hardly allocated to government securities and thus not susceptible to any reduction in interest rate volatility, which otherwise might affect the fund’s return. It is mainly engaged in holding underlying corporate bonds until the maturity time so as to generate regular accrual income.

The fund carefully selects securities that have a high credit rating and is probable of yielding high results along with successfully mitigating the risk factors. It provides returns ranging from 4.20% to around 9% across various interest cycles. It delivers handsome returns and is also comparatively lower on risk than other debt funds that yield equally quality returns.

4.  Nippon India Gilt Securities Fund

This debt fund invests in Central and State government debt securities. Since they are issued by the government itself, they run the least risk along with generating optimal returns. Often new investors who are reluctant to invest in high-risk debt funds choose gilt funds of this sort. This is the best-suited option for beginners to gain an idea of the schemes and the working of the same without exposing their wealth to risk. This one is also suitable for investors who plan to invest in long term wealth creation. The returns vary from 7.30%to around 13%.

5.  Kotak Credit Risk Fund

This too is an open-ended debt scheme that invests in money market instruments to reap considerable returns with a bit of high credit risk. The returns are significantly higher but also come with a high-end risk factor and thus suitable for investors who are willing to take risks. However, often, they get away with a desirable amount as their return. The fund sells low-yield securities and focuses on buying high yield ones.

Few Things To Keep In Mind About Debt Funds Investments

The returns from debt funds are generally guaranteed. In case a fund fails to produce returns, it may be because of the credit rating is very low in the invested security or the movement rate of interest is negative, which is an extremely rare phenomenon.

The returns delivered are way higher than any other schemes. Also, one can choose among the varying terms.

An investor must remember to construct his investment portfolio in a manner as diverse as possible instead of focusing on a single debt security. This minimizes the risk factor.

Unless you are a professional yourself, you must seek advice from a professional fund manager and let him manage your funds. A precise idea of the market analysis and interest rate is very important for a fruitful investment. If you are planning to invest in a debt fund, do not wait anymore and choose from the above 5 exceptionally reputed and high yielding funds to reap the best benefits.

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