Debt Mutual Funds – Top 10 debt mutual funds of 2020

Debt Mutual Funds - Top 10 debt mutual funds of 2020

Debt Mutual Funds are considered to be one of the best investment options these days at the same time debt funds offer a wide range of investment plans.

Debt is also known as one of the safest investment option to earn profits, without exposing your money to volatile market such as equity.

Although debt instruments of less return than equity but debt funds grow steady and stable pattern, which makes debt funds the best option for those investors who want minimum risks on their investment.

Every company need funds to further expand its business and work on new projects so companies issue debt instruments to borrow money from their investors.

Debt funds can be in the form of fixed deposits, treasury bills, corporate bonds and other financial instruments.

Most of the debt instruments have fixed maturity date and investors get a fixed amount of returns upon maturity date.

Various categories of Debt Mutual Funds:

Debt funds are further categorized into various categories based on their durations.

Liquid funds

Liquid funds are one of the best short term investment option, these schemes offer you to invest your money in the money market with the maturity period of 91 days.

Ultra-short duration funds

It is another short-duration debt fund investment option, the lock-in period can be from 3 to 6 months.

Short duration funds

Short term funds can be a good investment option in debt instruments, these schemes are good for those investors who want their money with a duration of 1-3 years.

Medium duration funds

If you are willing to invest your money for the time period of 3-4 years than medium duration funds can be a good option for you. The Medium duration allows you to invest for 3-4 years in debt instruments.

Medium to long-duration funds

Medium to long-duration funds allows you to invest your money in debt funds for 4-7 years. These schemes are good options for long term investors.

Dynamic bond funds

Dynamic bond funds allow you to invest your money in debt instruments with multiple time durations under one scheme.

The investor has options to choose various time durations as per their earning goals.

Advantages of Debt Mutual Funds


Debt funds are considered to be one of the safest investments to earn profits because funds invest money in the money market or corporate bonds etc so these instruments are affected by the volatility of equity market.

Debt funds remain stable while equity share always moves up and down.


Debt funds are highly liquid if you face a financial emergency and you need money in that case you can withdraw money from debt funds in a short period of time. When you need money, you don’t have to break entire investment meanwhile you can take out desired part of the money and let remaining invested.

Professional management

Investment in debt funds is managed by professional fund managers or financial firms, they have years and years of experience to manage money.

As a beginner it can be difficult to choose the right fund for you, in this case, fund managers can help you pick the right fund and also help you to manage it.

Top 10 debt funds of 2020

Fund Name Fund Size (In cr) 1 Year Return
Nippon India Gilt Securities Fund 1,506 12.6%
SBI Magnum Constant Maturity Fund 745 12.3%
Edelweiss Government Security Fund 61 12.8%
IDFC government Securities Fund Plan 1,596 14.9%
Kotak Dynamic Bond Fund 1,726 12.4%
SBI Magnum Income Fund 1,519 14.3%
Axis Banking & PSU Debt Fund 17,591 9.8%
Mirae Asset Dynamic Bond Fund 119 11.4%
Axis Short Term Fund 8,115 11%
LIC MF Banking & PSU Debt Fund 1,751 9.2%

How to choose the best fund

Expense ratio – Expense ratio is an important factor to check before investing in debt funds.

Expense ratio shows how much your money will go toward managing the fund. Funds with lower expense ratio mean you will be high profit at the maturity period while funds with higher expense ratio offer low profits at the end.

Fund history – Before investing in any fund, first you must check its history that did fund achieved its target in different time frames.

You must check 3, 5 or 10 years of performance of fund if the fund had achieved most of its target in different time frames than if can be goof fund to invest.

Financial analysis – Financial ratios and analysis are important indicators of the fund’s past and future performance.

You should avoid funds which have higher standard deviation and beta because they can be risky, while you can pick funds with lower standard deviation and beta.

Look for the funds with higher sharp ratio, funds with higher sharp ratio can offer you a higher profit.

Points to consider before investing in Debt Mutual Funds

Investment objective – Before picking up any fund, you must have an objective in your mind that how much returns you want on your investment and for how long you want to keep your money invested. These are the two basic points percentage of return and duration of investment you must decide before picking up and plan.

Fund category – Debt funds are categorized in various categories you must pick up the fund plan as per your goals.

Debt funds offer fixed maturity plans (FMPs), monthly income plans (MIPs), dynamic bond funds and income funds etc so you must pick the fund as per your financial desires and requirements.

Risks factor – Although debt funds are considered to be a very safe investment but still low moderate risks are involved.

Before investing in any fund you keep interest rate risk and liquidity risk in your mind, the fund’s value may fluctuate when the rate of interest changes, also there can be liquidity risk when funds managers are not able to sell funds due to lack of demands.


Team R Wealth

Team R Wealth

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