Personal Development

5 Best Debt Mutual Funds Better than FDs

Are you searching for the right investment option in mutual funds? There is only one way that can help you to search for the best investment option, i.e. side by side comparison. FDs are standard, and you invest an amount in them for the guaranteed returns and tax returns. It has been a part of every household for decades now.

Henceforth, witnessing the slump in FDs with the marked transition towards the debt mutual funds. This article is all about how debt mutual funds are better than FDs.

So let us explore!

Shifting from Conventional FDs to Mutual Funds

There was a time when every extra money, bonus, and incentive were invested in Banks in the form of FDs. Our parents have ended up supporting their FD, well at the time, it was said to be the most sensible thing. It was considered the best option to earn interest while ensuring capital protection. But suddenly the numbers have started decreasing.

People with well-knowledge came up with the idea of a debt fund. What has changed now? Mutual Funds have come to the fore in the recent few years. Remember demonetization? Mutual funds could cash in on the opportunity that became available due to the reduced deposit return rates.

Also, due to the availability of tax saving mutual funds, it was rose to prominence. When debt funds started giving more returns in terms of liquidity, many low-risk investors decided to jump. Hence, shifting from conventional FDs to Mutual Fund became easier.

Why Investing in Debt Mutual Fund is Beneficial?

Debt Funds can be said as the conventional FDs in terms of risk. Debt funds help investors to give steady income throughout the investment horizon. You can even find various debt funds and their duration directly from the fund houses or online or through a third party. Therefore, it will also help the investors to understand a fund’s performance that depends on the rates. It will also make it easier to get an advantage to form the volatility by making informed decisions.

Let’s Compare FDs with Debt Mutual Funds

Let’s have a look at the difference between FDs and Debt Mutual Funds. The table below helps you to decide which investment is suitable for you:

ParticularsDebt FundsFDs
Rate of Returns7-9%6-8%
Dividend OptionYesNo
RiskLow to ModerateLow
Investment ExpenditureA nominal expense ratio is chargedNo management cost
Mutual Funds vs Fixed Deposit

Here are five best debt mutual funds better than bank FDs, so this will take a minute to have a look at the investment strategies;

  • IDFC Government Securities Investment Plan Direct Growth

IDFC Government Securities Investment Plan Direct-Growth is a debt related scheme offered by the IDFC Mutual Fund. The fund has Rs1569 crore of AMU, i.e. Asset Under Management and a NAV of Rs28.92 approximately until March 2021.

The Government Securities Investment Plan Direct-Growth has been considered the best because of the moderate-risk investment plan and the minimum SIP of Rs1000 and a lump sum investment of Rs5000.  It has generated a fund of at least 11.67% and 10.18% returns across 3 to 5 years. So did you find this one beneficial, or are you still searching for the better one?

  • SBI Multi Asset Allocation Fund Direct Growth

It is an open-ended fund that many of you might have heard about. This allows you to invest in gold-related instruments, equities, debt, and it does include ETFs.

The SBI Multi-Asset Allocation Fund Direct-Growth Fund has an AUM of Rs 317 crore and a NAV of 34.93 in March 2021. This fund has the high-risk category but still the trustworthy one.

How? As it requires the minimum SIP of Rs500 and a contribution can be exceeded to Rs5000. The portfolio allocation across the industries includes the traded funds exchanged, financial services, pharmaceutical, IT, and the list goes on.

Let me tell you if you are making more than 10% investment, then the nominal fee, i.e. 1% redemption fee, will be charged if it is redeemed within 12 months.


This fund has given 9.51% annualized returns in the past few years. The returns were 9.21%, it has continually hit the benchmark in the DEBT segment. It is amongst the best remarkable DEBT mutual funds that provide a return of 9.21% in the last year.

The lump-sum amount that is required to invest is Rs 5000. The minimum SIP investment amount needed for this scheme is Rs 1000. This is the short term fund direct plan growth that can be beneficial for you.

  • HDFC Credit Risk Debt Fund Direct Growth

The fund has given 9.39% annualized returns in the past few years. This is quite good with the return of 13%. It has continually hit the benchmark. It is one of the most remarkable debt mutual funds in India.

The fund is constantly outperformed as compared to the similar kinds of funds. How? By providing the 13% returns. The minimum lump-sum amount is required to invest in this scheme is Rs 5000.

  • Aditya Birla Sun Life Corporate Bond Fund Direct Growth

The fund has given a 9.52% annualized return in past years. The return to this was 8.84%. The fund is good and outperformed the minimum investment amount required to invest in this scheme is Rs 100. Henceforth, the minimum SIP is the same as the lump-sum investment amount.

These are some of the options that you can try! Start investing now.

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