5 Tips For Selecting The Best Debt Mutual Funds
Niharika pandey
A debt mutual fund is defined as a scheme that invests in fixed income instruments or assets. A debt mutual fund invests in areas such as corporate and government bonds, corporate debt securities, and money market instruments. These funds invest in areas of profitable capital appreciation. They are also known as fixed-income funds or bond funds.
If you want to take a low risk on your money with high liquidity rates, you prefer debt mutual funds. Below are the tips mentioned to select mutual funds in India.
They are as follows:
- Expense ratio
- Fund rating
- Historical performance
- Fluctuation in interest rate
- Maturity of fund
Detailed explanations of these tips are mentioned below. They are as follows:
- Expense ratio
The ratio used from the investment to manage the fund is known as the expense ratio. The expense ratio and returns on the investment are inversely related to each other. Lower is the expense ratio; higher is the returns on the investment.
- Fund rating
If you want to invest your money in a particular fund, then decide according to the fund's credit quality rating. The funds with AAA should be preferred, whereas AA+ is also good for investment purposes.
- Historical performance
Debt mutual funds with a good history record should be preferred. If you are interested in investing in a particular type of fund, always start the research according to the history or past tracks. It will give you a better idea regarding the investment.
- Fluctuation in interest rates
If you are a regular investor or a beginner, you must have heard that the market always witnesses fluctuation from time to time. So before choosing a particular fund, always research the fluctuations in the interest rate.
- Maturity of the fund
Debt mutual funds always come with a date of maturity. Choose your fund according to the maturity date and your financial plans. Always start investing by fixing a financial goal and working according to it. You can choose a fund according to the term of investment you are choosing. There are many types of funds, such as short-term funds, long-term funds, medium-term funds, etc., with varying maturities. You can also take help from the professionals in case of doubts to prevent losses.
When we read or try to find tips to select the best funds, we have hopes. Now having high hopes can give you direction, but you should always make decisions according to your financial needs. There are many types of debt funds in the market but always choose them according to your financial plans and investment risk. Additionally, you should maintain your portfolio for better investment options. Several other options are also available in the market, such as SIP. It is also known as a systematic investment plan. It is a planned method to start investment according to the financial goals and requirements. One can also calculate via an investment risk profile calculator to take the call accordingly.