Debt Mutual Funds invest mainly in debt or fixed income securities such as treasury bills, corporate bonds, government securities, and money market instruments that have various time horizons. Investors choose these funds as they are unaffected by market volatility, provide stability to the asset portfolio, receive tax deductions and have high liquidity. Listed below are the different Debt Mutual Funds classified by SEBI.

(Note: The Macaulay Duration is the weighted average term to maturity of the cash flows from a bond)

Overnight Funds

These funds are for those risk-averse investors who feel Debt mutual funds are complex. These type of Debt Funds have no risk of interest rate fluctuations, credit rating and credit default risk, as you are investing in securities with one day maturity period. The top performing Overnight Funds include:

(Funds Not available)

Liquid Funds

If you have a low risk appetite then Liquid Funds are your preferable option. These funds invest in short term instruments such as treasury bills, government securities and call money. They invest instruments with 91 days or lower maturity period. They also have the lowest interest rate risk and don’t charge exit load. The top performing Liquid Funds include:

• Tata Liquid fund
• Reliance Liquid fund
• Kotak Liquid fund
• ICICI Prudential Liquid fund
• Aditya Birla Sun Life Liquid fund
• Invesco India Liquid fund
• HDFC Liquid fund
• IDFC Cash Fund

Ultra short duration fund

Quite similar to Liquid Funds, ultra short duration funds invest in securities that mature upto 91 days. If you are looking for an investment duration between 1-9 months then, this fund is your cup of tea. These funds provide higher liquidity and earn higher dividends than that of a liquid fund. The top performing Liquid Funds include:

• UTI Ultra Short Term Fund Growth
• Aditya Birla Sun Life Savings Fund Growth Plan
• SBI Magnum Ultra Short Duration Fund Growth
• Franklin India Ultra Short Bond Fund Retail Growth
• Kotak Savings Fund Growth

Low Duration Fund

Low Duration Fund invest in short-term debt and money market instruments with maturity period between 6 – 12 months. The primary objective of this fund is to provide fair returns on investments with lower risk thereby increasing the potential to earn quick money. The top performing low duration funds include:

• IDFC Low Duration Fund Plan Growth
• ICICI Prudential Savings Fund Growth
• Franklin India Low Duration Fund Growth
• Kotak Low Duration Fund- Standard Plan-Growth Option
• SBI Magnum Low Duration Fund Plan Growth

Money Market Fund

Money Market Funds have short term maturity period of less than 13 months. They primarily invest in highly liquid cash and cash equivalents that have considerably high credit ratings. They ensure high liquidity with negligible level of risk. The top performing money market funds include:

• ICICI Prudential Money Market Fund Retail Growth
• Kotak Money Market Growth
• SBI Short Term Debt Fund Plan Growth

Short Duration Fund

Short Duration Funds are open-ended short-term Debt Funds that invest in securities with the Macaulay duration between 1- 3 years. One prerequisite of investing in these funds is that in case the central bank increases interest rates then, the impact of it is minimal on the schemes, this is also another reason why mutual fund advisors recommend Short Duration funds. The top performing short duration funds include:

• HDFC Short Term Debt Growth
• ICICI Prudential Short Term Fund Growth
• Axis Short Term Growth
• Franklin India Short Term Income Plan Growth
• L&T Short Term Bond Fund Growth
• IDFC Bond Fund – Short Term Plan Plan Growth
• Kotak Bond Fund Short Term Growth

Medium Duration Fund

Medium Duration Funds are meant for investors who look for high returns with moderate liquidity by investing in debt and money market instruments. They are open-ended debt schemes that invest in securities with a maturity period between 3 – 4 years. The top performing medium duration funds include:

• Aditya Birla Sun Life Medium Term Plan Plan Growth
• Kotak Medium Term Growth
• ICICI Prudential Medium Term Bond Fund Growth
• Franklin India Income Opportunities Fund Growth
• Reliance Strategic Debt Fund Growth Option
• SBI Magnum Medium Duration Fund Growth

Medium to Long Duration Funds

Quite similar to the previous fund, the Medium to Long Term Duration Funds are also open-ended debt schemes that invest in securities or instruments with the Macaulay duration between 4 – 7 years. Since these funds are invested for a long tenure, they have the possibility of yielding higher returns, however, they are subjected to interest rate changes. The top performing medium to long duration funds include:

• ICICI Prudential Bond Fund Growth
• UTI Bond Fund Plan Growth
• Kotak Bond Growth
• IDFC Bond Fund – Income Plan – Growth
• Aditya Birla Sun Life Income Fund Plan Growth

Long Duration Fund

These funds are meant for investors who are willing to be invested for longer periods. Long Duration Funds have maturity period greater than 7 years. Since you invest longer with these funds, you may earn higher returns, however, they fluctuate according to the changes in the interest rates. Some long duration schemes include:

( Funds Unrated)

Dynamic Bond

These funds are known for their massive Assets Under Management (AUM) that run into a portfolio that is worth several thousand crores. They are called dynamic because, here fund managers trade securities with varied maturity periods as per rate changes. These bond strive to provide optimal returns in any market condition (both rising and falling situations). The top performing Dynamic bonds include:

• ICICI Prudential All Seasons Bond Fund Growth
• UTI Dynamic Bond Plan Growth
• Kotak Dynamic Bond Growth
• Franklin India Dynamic Accrual Fund Growth
• DSP Strategic Bond Fund Growth
• Aditya Birla Sun Life Dynamic Bond Fund Plan Growth
• IDFC Dynamic Bond Fund – Growth

Corporate Bond Fund

Corporate Bond Fund invest into fixed income instruments such as bonds, debentures and commercial papers (80% of corpus). These are meant for investors who understands precisely the lurking risks in this fund. There are times when they have a very little component of government securities in their portfolio. Three top performing corporate bond funds include:

• HDFC Corporate Bond Growth
• ICICI Prudential Corporate Bond Fund Growth
• Aditya Birla Sun Life Corporate Bond Fund Plan Growth

Credit Risk Fund

These funds are popularly known for the fact that investors get to earn double-digit returns. These funds invest in corporate bonds of 65% of total assets (investment in less than the AA rated instruments). The dividends earned from these funds are exempted from tax, however, the returns earned within 3 years are subject to short-term capital gain, taxed according to the income-tax slab rate you fall into. The top performing credit risk funds include:

• Aditya BSL Credit Risk Fund Plan Growth
• UTI Credit Risk Fund Plan Growth
• SBI Credit Risk Fund Plan Growth
• Reliance Credit Risk Fund Growth
• DSP Credit Risk Fund Growth
• Kotak Credit Risk Growth

Banking and PSU Fund

These funds invest 80% of the investment corpus into debt instruments of banks, Public Sector Undertakings (PSU) and public financial institutions with the objective to provide regular income. Here are some Banking and PSU Funds:

• ICICI Prudential Banking and PSU Debt Fund Growth
• DSP Banking & PSU Debt Fund Growth
• Axis Banking & PSU Debt Fund Growth
• Aditya Birla Sun Life Banking & PSU Debt Fund Growth Plan

Gilt Fund

Gilt funds are known for providing security for the investors as they invest 80% of the corpus in government securities and government loans (central and state). They provide moderate returns as they invest in assets with better quality. Though the returns are considerable, they are not fixed as they are subjected to changes due to interest rate fluctuations. The top Gilt funds include:

• UTI Gilt Fund Plan Growth
• SBI Magnum Gilt Fund Growth
• HDFC Gilt Fund Growth
• Reliance Gilt Securities Fund -Growth
• IDFC Government Securities Fund – Investment Plan – Growth
• ICICI Prudential Gilt Fund Growth

Gilt Fund with 10 year constant duration

The only difference between “Gilt Fund” and “Gilt Fund with 10 year constant duration” is that they invest in government securities (80% of the total assets) which have a maturity period of 10 years. They are governments instruments, hence they are safe and provide lower risk. The top Gilt funds with 10 year constant duration include:

( Funds Unrated)

Floater Fund

Floater Funds invest in bonds having a floating interest rate. The investors get to earn higher returns when the interest rate goes down and bond prices move up. However, returns take a back seat when interest rate goes up. The minimum investment in floating rate instruments are 65% of the total investment corpus. The top performing floating rate funds include:

( Funds Unrated)