Aditya Birla Sun Life Mutual Fund

Debt Funds: Debt Mutual Funds in India - Aditya Birla Sun Life Mutual Fund

Debt Funds – Our Savings Solutions

Debt Mutual Funds

Debt mutual funds, also known as debt funds, invest in a mix of debt investments such as treasury bills, government securities (G-Secs), corporate bonds and money market instruments.

While debt funds invest in debt securities of different maturities, but each security has a fixed maturity date and interest rate. This makes debt mutual fund a lower risk investment compared to other mutual funds like equity funds. Debt funds manage this risk generally by investing in debt securities rated by reputed credit rating agencies. Income for debt funds arise due to interest income and capital appreciation of debt securities.

What are Saving Solutions?

Our Savings Solutions are aimed at preserving your money, providing you with liquidity and giving you tax-efficient returns.

Who can benefit from Saving Solutions?

Debt mutual funds work for those investors with a low to medium propensity for risk and seek high liquidity. Since debt funds provide tax-efficient returns, they are ideal for first time mutual fund investors. They can also provide regular income, which may be beneficially to the retired individuals.

Make Inflation work in your favour
Inflation affects your returns from any investment including mutual funds. But, in case of savings solutions, you can use it to your advantage - through indexation - which can help you reduce the amount on which you have to pay tax. You can benefit from indexation, if investing for more than 1 year. Please consult your tax advisor on how to take advantage of indexation.
Aim to preserve your money
These schemes generally invest in instruments like bonds of reputed Indian companies and securities (bonds) issued by the Government of India which are considered relatively safe.
Aim to provide Liquidity
If you need to withdraw your money, all you have to do is submit a redemption slip and your money is normally credited to your bank account within one working day. You may also opt for an online redemption facility offered by many fund houses for added convenience.
Tax-efficient returns
You can earn returns in the form of monthly / quarterly dividends etc. which are completely tax-free in your hands. A dividend distribution tax of 28.325% is applicable and is deducted by the fund house. There are various savings solutions available depending on the time period that you would like to invest for: a. 1 day to 3 months b. 3 to 6 months c. 6 months to 1 year d. 1 year +
Fund Categories

    Short term Fund: Schemes whose average maturity over the last 6 months is between one year and 4-5 years.

    Ultra short term: Schemes whose average maturity is less than one year, but which are not liquid schemes.

    Liquid: Schemes which do not invest in securities with a residual maturity of more than 91 days.

    Gilt (medium and long term): Schemes which invest in government securities and can vary their average maturity.

    Gilt (short term): Schemes which invest in government securities whose average maturity over the last six months is between one year and 4.5 years.

    Arbitrage: Schemes which seek returns from arbitrage opportunities between equity and derivatives and invest in debt when no arbitrage is possible.

    Income: Schemes which can vary their average maturity widely as per the declared objectives; these invest in government securities, money markets, bonds etc.

  • What are Debt Mutual Funds?

    Debt Mutual Funds will invest all your money in debt instruments like Government Bonds and fixed income investments to ensure you fixed rate of returns to an extent. It is less volatile than equity mutual funds and has less risk. The fee ratios on debt funds are lower, on average, than equity funds because the overall management costs are lower.

  • Why invest in Debt Funds?

    Debt mutual funds score better than the debt instruments directly because of the tax benefits that we get from their dividends compared to interest from the debt instruments. Preservation of capital is a major advantage that we get from the debt mutual funds. The potential for capital appreciation and higher returns that the traditional debt instrument can be maximised from these funds. By nature of their investments and the tax treatment, these are for investment for the short term only.

  • What are different types of Debt Funds?

    There are various types of Debt Mutual Funds that invest in various fixed income securities of different time horizons. • GILT FUNDS • INCOME FUNDS • MONTHLY INCOME PLANS (MIP) • SHORT TERM PLANS (STPS) • LIQUID FUNDS

  • What are Gilt Funds?

    They invest their corpus in securities issued by the government. These funds carry zero default risk but are associated with interest rate risk. So, there could be a possibility that the debt funds lose some part of their net asset value (NAV) also. But these schemes are safer as they invest in papers backed by government.

  • What are Short Term Plans?

    These funds are for those with an investment horizon of three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate.

  • What are Liquid Funds?

    Liquid funds are mutual funds that offer high liquidity. This means, the units of these funds can be sold immediately, and the invested amount can be redeemed quickly.

  • What are Capital Protection Funds?

    Capital protection funds are mutual funds designed to protect your capital. These funds put a major portion of the investment in bonds, and a small portion in shares. Over time, the portion invested in bonds grows to the size of your original investment. So even if the portion invested in shares does not do well, your capital is still protected.

  • What are Fixed Maturity Plans?

    These are also close-ended schemes and are similar to CPFs. These funds have fixed tenure like 400 days, 1000 days etc., Units of these close-ended funds can be purchased only during the New Fund Offer period and cannot be redeemed during the tenure of such funds. To provide liquidity to investors, FMPs are also listed on Stock Exchanges.

  • What are bonds?

    Sometimes large organizations or even countries need money for various purposes. The solution is to raise money by issuing bonds to a public market. Thousands of investors then essentially provide or loan a portion of the capital needed. By purchasing bonds an investor becomes a creditor (i.e. gives Debt) to the corporation or government for which he/she is entitled to a fixed interest after a certain period (maturity).

  • For whom are Debt Mutual Funds suitable?

    Bonds are known as fixed-income securities because the exact amount of cash one gets back if one holds the security until maturity is known. Debt Mutual Funds are suitable for conservative investors and retirees. It is also suitable for those investors who are looking for a certain return of their investment in short period of time.

Funds Under Saving Solutions

Here’s what we found for you You can compare up to 3 funds.

Funds are bucketed on various parameters.
*Annualized returns are displayed for 1 year and above.
Annual return for 2017 will be added shortly.