What are debt funds?

Debt funds are funds that invest in various debt schemes. These debt schemes could be very varied and include government securities, commercial paper, bank deposits, treasury bills, NCDs etc. The objective is to invest in safe instruments and generate returns for investors. The returns from these debt schemes typically give you returns of 7 to 10 per cent. If you invest in dividend plans, then the income so received is tax free in the hands of the investor. So, you do not have to worry on that count.

Types of debt funds in the market

There are various types of debt instruments that you get and you can choose the one you like the most. Among these include long term debt funds, gilt funds, short term debt funds, income funds, ultra short term funds, liquid funds etc. Now, choosing one of these really depends on you and you can pick and choose depending on your needs. For example, if you have interest to invest only for the short term go for funds that offer you only a short term tenure like 1 year, 2 years and so on and so forth. Here are a few best debt fund to choose from:

Tata Liquid Fund

Tata Liquid Fund has been rated no 1 by Crisil. There are reasons why the fund has been highly rated. Let us begin with the returns. In fact, the returns from the fund have been more or less like bank deposits. For example, the 1 year returns from the fund has been 7.61 per cent, which would be lower then company deposits, but higher than bank deposits. Remember, that if you go for the dividend option the yields would be higher, because there is no taxation. So, in terms of taxation the post tax yields are very high, much higher then bank deposits. The 5- year returns are pretty decent at 8.76 per cent.

Where is Tata Liquid Fund Deploying money?

Tata Liquid Fund has placed large amounts of money in safe bank deposits. For example, at the moment the fund has deposits of almost 6.74 per cent of its assets under management in the fixed deposits of Bandhan Bank. The bank has also deployed money in the commercial Paper of Sidbi and Reliance Jio. These are all instruments that can be considered as safe. The fund declares a daily dividend of around 0.1530. The net asset value of the fund under the weekly plan if Rs 1000.857.

IndiaBulls Liquid Fund

India Bulls Liquid Fund should be among the Best debt funds for 2017. The fund has been rated number 1 by Crisil and Value Research Online has also accorded it a 5 star rating, which is the highest rating. The reasons for such a high ratings continue to be the returns and the high quality debt instruments in the funds portfolio. For example, the one year returns from the fund is 7.90 per cent. The fund has very low expense ratio, which is probably what has helped boost returns. The returns since launch of the fund if 8.90 per cent, which is pretty healthy.

High quality portfolio

The fund has a very solid portfolio including the likes of SIDBI commercial paper, Punjab and Sindh Bank, Reserve Bank of India Treasury Bills etc. If you are hence looking to invest and safety is a top priority, this would not be a bad fund to invest in.