May 18, 2024

The Best Debt Mutual Funds for 3 Years- A Guide to Secure Investing

With the goal of investing for a shorter period, the best option is to opt for a debt mutual fund. It offers a compelling option for people looking for stable and safe returns with lower volatility compared to investments in equities.

The investment of debt mutual fund encompasses fixed-income securities like corporate bonds, government bonds, treasury bills, and other debt instruments that makes them attractive for those investors who are conservative and looking to preserve their capital while at the same time ensuring consistent income.

If you intend to invest your money in a debt mutual fund, you must be in search of the best short-term funds. This article will specify some of the best debt mutual funds in India for three years that you can consider investing in. Hold your patience and read till the end!

What Are Debt Mutual Funds?

A debt mutual fund is an investment tool that pools onet from multiple investors and invests essentially in fixed-income securities. The main aim is income generation for investors through the payment of interest on the underlying debt instruments.

This type of mutual fund makes investments in a plethora of fixed-income securities like government bonds, certificates of deposits, and corporate bonds, among various other money market instruments.

Debt mutual fund serves the primary objective of offering a stable source of income and ensuring capital preservation. A range of investment options are offered by debt funds to cater to various investment horizons and risk profiles. The risk involved in this kind of fund is comparatively lower than equity funds and is a perfect choice for investors who don’t intend to involve huge risks.

Best Debt Mutual Fund For Three Years

Below is a list of some of the best debt mutual funds in India for investing in three years.

PSU And Banking Fund:

This is a kind of debt mutual fund that makes 80% of its investment in various debt instruments of public sector companies and banks. These involve bends issued by PSUs or banks, debentures, and Certificates of Deposits. The fund lends to quality borrowers, which ensures a lower risk of defaulting on the borrower’s part. This fund may get impacted by movements in interest rates. Here is a list of some best PSU and Banking Funds and their return percentage.

Name Of Fund Returns in Three Years
Kotak Banking And PSU Debt Fund 6.74%
ICICI Prudential Banking & PSU Debt Fund 6.90%
Nippon India Banking & PSU Fund 6.94%
Bandhan Banking & PSU Debt Fund 6.89%
HDFC Banking and PSU Debt Fund 6.76%

Short Duration Funds:

These are debt mutual funds that lend to renowned private companies or government-backed institutions which entertain a proven track record of timely loan repayment. But the credit risk may differ based on the type of fund. The average lending period of these funds is 1 to 3 years. Some of the most popular short-duration funds are as follows:

Name Of Fund Return In Three Years
Aditya Birla Sun Life Short-Term Fund 7.82%
UTI Short-term Income Fund 8.48%
ICICI Prudential Short-Term Fund 7.52%
Axis Short-Term Fund 6.90%
HDFC Short-Term Debt Fund 6.97%

Corporate Bond Fund:

In this type of debt mutual fund, 80% of the investors is invested in the best corporate debt instruments. The high rating of credit is an indication that the companies entertain a higher probability of paying the debts off. The best corporate bond funds are as follows:

Name Of The Fund Return In Three Years
Aditya Birla Sun Life Corporate Bond Fund 7.12%
Nippon India Corporate Fund 6.75%
Kotak Corporate Bond Fund 6.34%
Axis Corporate Debt Fund 7.50%

Conclusion:

These are some of the top picks if you intend to invest your money for three years in a debt mutual fund. However, conducting thorough market research is essential to ensure that the potential of the mutual fund aligns with your goals.

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