Best Debt Funds

Past few years have seen portfolios leaning heavily towards equity. However, smart investors are those who understand the risk and diversify their portfolio. Fixed Deposits and Debt Mutual Funds are two most common choices for risk-free investments. Infact Debt Mutual Funds are little easier to deal with (if you have an online demat account, nothing like it) and more transparent.

Easy because you can buy and sell any time without committing for a specific period in beginning and transparent because you know where your money is invested.

Check the load
Yes, it's very important. Some funds don't charge any entry or exit load. So you should go for these funds when you are using debt funds as savings account and might need to buy/redeem frequently.

There are few schemes that offer zero entry load after a specific period (say 6months or 1 year). You can go for them if you won't need your money for that period.

Approximate Returns in different types of debt funds in last one year
Money Market Debt Funds: 8.0 - 8.2 %
Debt - Short Term: 8.5 - 10.5 %
Debt - Long Term: 9.0 - 14.5%
Debt - Floating Rate: 8.7 - 9.3%

However, Debt Short term and long term have shown negative returns also. See Moneycontrol for comparison of returns.

Here are few good funds from each category. However, before investing don't forget to check their past performance, investment style, load structure and your objective. They should be in sync.

Money Market: LIC MF Liquid Fund (G) :: HDFC Cash Mgmt. Fund - SP (G) :: HDFC CMF - Savings Plus RP (G)

Debt - Short Term: Kotak Bond (Regular) (G) :: Reliance Short Term Fund (G) :: Tata Income Fund (App.)

Debt - Long Term: Birla Income Plus - Retail (G) :: Birla Income Fund (G)

Debt - Floating Rate: Kotak Floater LTP (G) :: LIC MF Floating Rate Fund (G) :: HSBC FRF - LTP (RP) (G)