Best Debt Mutual Funds to Grow Your Wealth

Debt funds are financial instruments which primarily invest in fixed-income earning instruments i.e. treasury bills, corporate bonds, government securities, commercial paper, and other money market instruments.

What are Best Debt Mutual Funds?

Debt mutual funds are those funds which invest in fixed income earning instruments like certificate of deposits and government treasury bills. The primary objective of a debt fund is to provide steady income through appreciation of the fund value. They are relatively safe as the underlying securities generate interest at a fixed rate throughout the policy tenure. The underlying security is selected by the fund manager on the basis of its credit rating. For example, a higher credit rating states that a debt security has a higher chance of paying interest regularly along with repayment of the principal amount.

You can evaluate a debt fund based on the following parameters:

• Returns: You need to look into the consistency of the returns at an interval of every 1, 3 and 5 years. It is advisable to invest in a fund which have outperformed their benchmark index and peer funds in a consistent manner across different investment horizons.
• Historical Performance: Ensure that you invest in a fund which has a successful and consistent track record for at least say 5 to 10 years.
• Expense Ratio: This is the expense required to maintain the fund. Always select a debt fund with a lower expense ratio, but in return comes with superior performance.
• Financial Ratio: These include standard deviation, Sharpe ratio, alpha and beta. They help to analyze the fund. Fund with a higher Sharpe ratio means that the fund gives higher returns on every additional unit of risk taken.

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