Tips to Choose Best Debt Mutual Funds to Invest

A mutual fund investment to debt funds,are most preferred by investors who not take too much risk and want to earn optimal returns in a short duration.

These funds mainly invest in fixed Income instruments like Government securities, Treasury bills, Corporate Bonds, etc. As debt funds invest in government securities these are less risky compared to equities.

Average Maturity - Duration in Debt Fund

Investor Need to plan or decide their Debt Fund based on its Maturity period for optimum risk return in debt fund by minimize extra risk

Current Yield or Portfolio Yield of Debt Fund

The current yield is a measure of the interest income generated by the bonds in the portfolio. Funds that invest in debt or bonds that have a higher coupon rate (or yield) would have a higher overall portfolio yield.

Credit Quality of Debt Fund

Checking the credit quality of the bonds and debt securities is an essential parameter. Bonds are assigned a credit rating by various agencies.

Credit Quality of Debt Fund

Ex. A bond with AAA rating is considered to be the best credit rating and also implies a safe and secure investment.

Assets Under Management (AUM)

AUM is the total amount invested in a particular scheme by all investors. Investors need to select scheme assets that have a considerable AUM.

Expense Ratio

A higher expense ratio creates major impact on the return of Debt fund or bond and their overall performance. Ex. Consider the Management Fee or the fund running expense as expense parameters

Interest Rate

A Debt fund is affected by interest rate when the interest rates rises the bonds will fall and when the interest rates decreases the debt fund or bond give maximum return

Read More Stories Hindicup.com