Thursday, 28 July 2016

Top 3 Best Debt Income Mutual Funds to Invest For Regular Income

Posted by RaviKumar Nama
Every one wants to generate higher returns with greater stability and safety for their capital. But, to get higher returns you need to take some risk. Not every one ready to take the risk and used to invest in low-earning instruments like Bank FD, Postal, Endowment or Money-back Insurance Policies which result in low appreciation to their investments. To fill this gap, Income Mutual funds are the best suitable category which generate regular income through investments in a basket of debt and
money market instruments. What are the best Debt Income Mutual funds and how they have generated the performance from the last couple of years?



What are Debt Income Mutual Funds?


Debt Income Mutual funds invest in Government bonds, Debentures and various Corporate bonds that are maturing medium to long term i.e. 1 year to 5 years. Hence these Debt Income Mutual funds are best suitable who wanted to invest their lump sum amounts for a period of 1 year to 5 year time frame and want to get higher returns than Bank FDs or Postal Investments.  Investors with low Risk-appetite and who wanted to get steady and reasonable income in Medium to Long term can invest into these Mutual funds. Generally, for retired employees, these funds are good alternatives for their investments and can opt for SWP for amount withdrawals at regular intervals.

Who Can Invest Into Debt Income Mutual funds?

  1. Who wanted to Park their lump-sum amounts in Medium to Long term horizons
  2. For conservative investors whose risk appetite is low and want to generate steady income which is higher than the Bank FDs.
  3. Investors who wanted to diversify their portfolio with Debt flavor

Top 3 Best Debt Income Mutual Funds to Invest:

There are many Debt Income Mutual funds available in the Market. However, based on their track record, AUM, Expense Ratios and the Ratings given by various Market Research firms, we identified the below 3 Mutual funds which are best in Debt Income category.

1. Birla SL Treasury Optimizer Fund:

This is my first choice in Debt Income category. It is a 5-star rated fund and and is consistently giving higher returns from the last 5 years. Top holdings are consist of GOI securities, Central Government Loans and Corporate bonds. If you see the performance levels of the fund, it has been giving 10+ % returns which is far higher than the current Bank FDs (7.5% - 8%) from the last 5 years. This fund has been launched in April 2008 and yielded returns 9% since inception. Minimum investment is Rs 1000 and minimum additional investment is Rs 1000.  As it is open-ended fund, there is no exit load. Minimum SWP withdrawal is Rs 1000. This fund is best suitable for looking regular steady income at regular intervals.


2. ICICI Prudential Banking & PSU Debt Fund:

My next choice in Debt Income category is ICICI Prudential Banking & PSU Debt Fund. This scheme has been giving steady and reasonable income for investors with low risk appetite. The Scheme seeks to generate regular income through investments in a basket of debt and money market instruments consisting predominantly of securities issued by entities such as Banks and Public Sector Undertakings (PSU) with a view to providing reasonable returns, while maintaining an optimum balance of safety, liquidity and yield. Top holdings in its portfolio consists of Central Govt Loans, GOI securities, Commercial Papers, Debentures, Treasury Bills and Corporate Bonds.


3. HDFC Medium Term Opportunities Fund:

The third choice in Debt Income category is HDFC Medium Term Opportunities Fund. The scheme seeks to generate regular income through investments in Debt/Money Market Instruments and Government Securities with maturities not exceeding 60 months. Because of the consistent performance from the last 5 years and the brand fund house making it one of the Best Debt Income
fund. If you see the portfolio, it is little bit riskier assets compared to above 2 funds. But the returns are comparable and generating 9.5+ % returns from the last 5 years. Top holdings consist of Corporate Bonds, Debentures and State Development Loans. Minimum investible amount is Rs 5000 and the minimum additional Investment is Rs 1000. The minimum withdrawal is Rs 500.


Conclusion:

Debt Income Mutual funds are best suitable for investors who can park their lump sum amounts from 1 year to 5 year time frame. To get maximum returns from any Debt Mutual fund, you need to wait for at least 3 years of time. 

1 comment:

  1. Debt mutual funds are great way to enter into stock market. I think people who are relying much on insurance products and not comfortable with mutual fund risk, they can easily try them. Thanks for this share.

    ReplyDelete