Debt Funds: Best Debt Mutual Fund for Investment in India

Debt Mutual Funds

Debt funds invest in ‘fixed income instruments’ like debentures, corporate and government bonds, certificate of deposits & money market instruments of different time horizons. Such fixed income instruments have a maturity date & generate an interest income like a bank fixed deposit. The main objective is to accumulate wealth by means of interest income and steady appreciation of the fund value. Debt funds do not invest in stocks.

Debt funds are perfect for short term goals that are up to 0-3 years away. Because they don’t fluctuate as much as equity funds in value, they have lower associated risk & corresponding lower returns when compared to equity mutual funds. Debt funds are ideal for investment goals where surety is more important than growth. For example, if you are planning to take a vacation to Bali two years from now, you can use a debt fund to save for it.

Key Benefits

Stability

As Debt Mutual Funds mainly invest in debt securities, they are relatively more stable when compared to equity investments

Diversification

Debt Mutual Funds invest in a range of interest-bearing instruments such as Treasury Bills, Government Securities, Corporate Bonds, Money Market Instruments and other debt securities

Lower Risk

Debt funds generally grow at a rate that is either at par with inflation or slightly more. This means they don’t grow as much as equity funds. But the slow pace means that they are far more stable in terms of value

Liquid than FDs

you can withdraw your investments at any time and the money is in your bank account in a few days

More tax efficient than FDs

Gains on debt mutual funds held for less than 36 months are treated as short term capital gains and taxed as per the income tax slab of the investor. Gains on debt mutual funds held for 36 months or more are treated as long-term capital gains and taxed at the rate of 20% after indexation

You don’t lose even a day’s growth

Investment never stops growing till you redeem

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Are Debt Funds Right For You?

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Popular categories of Debt Mutual Funds

There are a wide range of fixed income or Debt Mutual Funds available to suit the needs of different investors, based on their investment horizon & ability to bear risk

Liquid Funds - Invest in fixed income instruments with maturity of up to 91 days only
Ultra Short Duration Fund - are those which invest in fixed-income earning instruments with maturities of 3-6 six months
Low Duration Fund - are those which invest in fixed-income earning instruments with maturities of 6-12 six months
Money Market Fund- are those which invest in money market instruments with maturities upto 1 year
Short Duration Fund - are those which invest in fixed-income earning instruments with maturities greater than 1-3 years
Long Duration Fund - are those which invest in fixed-income earning instruments with maturities greater than 7 years
Dynamic Bond - are those which invest in fixed-income earning instruments across maturity duration
Corporate Bond Fund – Invest in highest rated corporate bonds
Credit Risk Fund- Invest in lower rated corporate bonds to generate higher yields though the default risk is higher than Corporate Bond Fund
Gilt Fund - Investing in government securities across maturity

Top performing* funds as per Morningstar

Ultra Short-Term Debt

Scheme Name	Morningstar^TM Rating	Returns in 2 Years	Returns in 3 Years	Returns in 5 Years
Franklin India US/T Bd Sup InstI Gr	*****	8.64%	8.89%	9.23%
SBI Magnum Ultra Short Dur Reg Gr	****	7.51%	7.37%	7.38%
Kotak Savings Fund Reg Gr	****	7.22%	7.41%	7.96%

(Annualised returns as per the Morningstar report as on 2^nd May 2019. For the complete report, click here)

To know more about investing in Mutual Funds funds refer our blog articles here : www.dbs.com/digibank/in/learn/investment.page

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How to Apply for Debt Mutual Funds

For DBS Bank users

Using the digibank mobile app
- Launch the app on your smartphone
- Log in and tap “Mutual Funds” in the navigation menu
- Follow instructions to complete verification
- Start investing!

Using the DBS Bank ibanking website
- Log in and select “Mutual Funds” in the navigation menu
- Follow instructions to complete verification
- Start investing!

New to DBS Bank?

Download the digibank mobile app on your smartphone
Launch the app and sign up for a full DBS Bank Savings Account
Log in and tap “Mutual Funds” in the navigation menu
Follow instructions to complete verification
Start investing!

Frequently Asked Questions

Are debt Mutual Funds risk free?

Given the nature of securities that debt funds invest in, debt funds can be exposed to three types of risks, viz. interest rate risk, credit risk and liquidity risk.

Do debt funds have a lock in period?

Most of the debt funds are open-ended and do not have lock-in period. Fixed Maturity Plans are one kind of debt mutual funds schemes with a pre-specified tenure. The basic objective of FMPs is to generate steady returns over a fixed period, thus immunizing investors against market fluctuations. FMPs are meant for investors who wish to lock their money at attractive yields prevailing at a given time

How do I choose the right debt fund to invest in?

Based on you risk appetite & investment horizon you can choose from a wide array of debt Mutual Funds on DBS Bank. The DBS Bank app will also prompt you in case you choose a fund which is above/outside your risk profile. To know about the top performing debt Mutual Funds refer our report here.

Disclaimers

*The information herein is prepared and furnished by Morningstar. The fund report is for your reference and information only. Specifically, such content/report is not intended nor shall it be construed as financial, tax or other advice or as an offer, solicitation or recommendation of securities or other financial products. DBS shall have no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of this content/report here in (including any error, omission or misstatement therein, negligent or otherwise) or further communication thereof.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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