Debt mutual funds have become a reliable investment option for those who seek stability with returns better than fixed deposits (FDs). These funds invest in fixed-income securities like government bonds, treasury bills, and corporate bonds, offering an option for investors who prefer less risk than equity markets. With fluctuating interest rates, some debt funds have outperformed expectations, delivering 10-24% annualized returns on 5-year SIP investments.
For investors looking for better returns without taking high equity risks, debt funds present an attractive alternative. Here are five debt funds that surprised everyone with their performance over the past five years.
1. Bank of India Credit Risk Fund – 24.54% SIP Returns
This fund delivered outstanding 24.54% annualized returns on SIPs over five years, making it the top performer in the debt fund category. A monthly SIP of ₹10,000 for 5 years grew to ₹11.01 lakh.
- SIP Annualized Return (5 Years): 24.54%
- Lump Sum Return (5 Years): 11.10%
- Total Investment: ₹6,00,000
- Value after 5 Years: ₹11,01,109
- Assets Under Management (AUM): ₹115 crore
- Launch Date: February 27, 2015
- Expense Ratio: 1.03%
2. Aditya Birla Sun Life Medium Term Plan – 12.88% SIP Returns
ABSL Medium Term Plan offered 12.88% annualized SIP returns in 5 years, converting a total investment of ₹6 lakh into ₹8.29 lakh.
- SIP Annualized Return (5 Years): 12.88%
- Lump Sum Return (5 Years): 10.41%
- Total Investment: ₹6,00,000
- Value after 5 Years: ₹8,28,787
- AUM: ₹1,921 crore
- Launch Date: January 1, 2013
- Expense Ratio: 0.85%
3. DSP Credit Risk Fund – 10.45% SIP Returns
The DSP Credit Risk Fund returned 10.45% annually on SIPs, transforming ₹6 lakh into ₹7.80 lakh over five years.
- SIP Annualized Return (5 Years): 10.45%
- Lump Sum Return (5 Years): 8.86%
- Total Investment: ₹6,00,000
- Value after 5 Years: ₹7,80,244
- AUM: ₹191 crore
- Launch Date: January 1, 2013
- Expense Ratio: 0.40%
4. Bank of India Short Term Income Fund – 10.36% SIP Returns
This fund offered stable returns of 10.36%, turning a 5-year SIP of ₹10,000 per month into ₹7.79 lakh.
- SIP Annualized Return (5 Years): 10.36%
- Lump Sum Return (5 Years): 8.66%
- Total Investment: ₹6,00,000
- Value after 5 Years: ₹7,78,476
- AUM: ₹71 crore
- Launch Date: January 1, 2013
- Expense Ratio: 0.45%
5. Aditya Birla Sun Life Credit Risk Fund – 9.85% SIP Returns
The ABSL Credit Risk Fund delivered 9.85% returns, growing the SIP amount of ₹6 lakh to ₹7.70 lakh in 5 years.
- SIP Annualized Return (5 Years): 9.85%
- Lump Sum Return (5 Years): 8.50%
- Total Investment: ₹6,00,000
- Value after 5 Years: ₹7,68,683
- AUM: ₹917 crore
- Launch Date: April 17, 2015
- Expense Ratio: 0.67%
Why Debt Funds Are a Good Option Amid Falling Interest Rates
Debt funds have become popular as interest rates are expected to decline in the coming months. Unlike FDs with fixed returns, debt fund returns may increase if bond yields fall, giving investors an edge. These funds offer the flexibility to invest for different durations, ranging from a few days to several years.
Debt funds, especially credit risk funds, carry a small degree of market risk, but they can still provide higher returns than FDs over the long term. With SIPs, investors can take advantage of market fluctuations, spreading their investment over time to reduce risk.
These five funds demonstrate that debt funds can offer significant returns over time, beating inflation comfortably. Investors, however, should assess their risk appetite and consult a financial advisor before investing.
Note: Past returns do not guarantee future performance. Always consult your financial advisor before investing.
