Investing in debt funds is an excellent way to balance and diversify your investment portfolio, especially for those seeking stability and lower risk compared to equities. Debt funds invest in fixed-income securities like government bonds, corporate bonds, and treasury bills, offering regular income and capital preservation.
They are suitable for conservative investors or those looking to reduce overall portfolio volatility. Debt funds can help achieve a steady return with lower market fluctuations, making them an essential component of a well-rounded investment strategy. They also offer flexibility, and liquidity, and can be tailored to various investment horizons and risk appetites.
Bank of India Credit Risk Fund Direct-Growth
NAV Rs. 12.04 per unit
The Bank of India Credit Risk Fund Direct Growth has delivered strong performance, with an investment of Rs. 1,000 made every 36 months ago growing to Rs. 45,189, reflecting an impressive XIRR of 15.42%. This debt fund primarily focuses on high-quality corporate bonds, offering attractive returns while managing risk.
Among its top investments are corporate bonds from Rashtriya Chemicals and Fertilizers Limited, JSW Steel Limited, and Aditya Birla Real Estate Limited. Rashtriya Chemicals and Fertilizers Limited’s bond, rated ICRA AA, offers a yield of 8.77% with maturity in August 2027.
JSW Steel Limited’s bond, rated CARE AA, has a yield of 8.75% and matures in October 2027. Additionally, Aditya Birla Real Estate Limited’s corporate bond, rated CRISIL AA, provides a yield of 10.4% with a maturity in February 2025. These investments contribute to the fund’s attractive risk-adjusted returns.
Aditya Birla Sun Life Medium Term Plan Direct Plan-Growth
NAV Rs. 40.2 per unit
The Aditya Birla Sun Life Medium Term Plan Direct Plan Growth has demonstrated solid performance, with an investment of Rs. 1,000 made 36 months ago growing to Rs. 42,976, reflecting an XIRR of 11.91%.
The fund primarily invests in high-quality sovereign bonds, focusing on government securities to ensure stability and moderate returns. Its top holdings include the 7.18% Govt Stock 2033, with a yield of 7.18% and a maturity date in August 2033, comprising 27.75% of the portfolio.
Another significant holding is the 7.26% Govt Stock 2033, offering a yield of 7.26% and maturing in February 2033, accounting for 10.41%. The 7.18% Govt Stock 2037, yielding 7.18%, matures in July 2037 and represents 5.47% of the fund’s assets. These investments support the fund’s steady returns with relatively low risk.
DSP Credit Risk Fund Direct Plan-Growth
NAV Rs. 45.48 per unit
The DSP Credit Risk Fund Direct Plan Growth has delivered a solid performance, with an investment of Rs. 1,000 made 36 months ago growing to Rs. 42,689, reflecting an XIRR of 11.45%. The fund invests primarily in government securities and high-quality corporate bonds, balancing risk and return.
Its top holdings include the 6.79% Govt Stock 2034, a sovereign bond maturing in October 2034, which accounts for 10.67% of the portfolio. Additionally, the fund holds bonds from Nirma Limited, rated CRISIL AA, with a yield of 8.45% and a maturity in April 2026, representing 15.89%.
Another key holding is the 7.75% bond from Nuvoco Vistas Corporation Limited, also rated CRISIL AA, yielding 8.06% and maturing in August 2025, making up 15.16% of the fund. These investments contribute to the fund’s stable returns.
Conclusion
In conclusion, the three debt funds highlighted – Bank of India Credit Risk Fund, Aditya Birla Sun Life Medium Term Plan, and DSP Credit Risk Fund – have all delivered impressive risk-adjusted returns of over 10% XIRR over the past three years.
These funds have strategically allocated their assets to a mix of high-quality government securities and corporate bonds, balancing stability and yield to provide attractive returns for conservative investors.
Their consistent performance underscores the potential for debt funds to play a valuable role in diversified investment portfolios, offering reliable income and capital preservation.
Written By: Dipangshu Kundu
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