Fixed Income Mutual Funds is a low-risk investment option in today’s era. If anyone looking for low-risk investments and stable returns without taking too much risk then, this is the bestest option for them.
So, in this article we are going to discuss all the necessary details for the Fixed Income Mutual Funds; like what is it, how it works, benefits of it, top 10 Fixed Income Mutual Funds in India and etc.
What Are Fixed Income Mutual Funds?
Fixed income mutual funds are also known as debt funds. Investor invests in debt securities like; government bonds, corporate bonds, treasury bills and other kind of fixed-income intruments.
Basically, these funds aim to provide investors with regular income and return through the interest payments as well as capital preservation. Here we explain why invest in fixed income mutual funds.
Reasons for invest in fixed income mutual funds
- Stable Returns: This is provides you a stable returns in comparison to stocks. It provides a perfect predictable returns.
- Regular Income: In that you can get your return on monthly basis or quarterly basis on regular mode.
- Lower Risk: As we know, it is ideal for those investors who are looking for low-risk investments.
- Tax Efficiency: You can get tax benefits in some debt funds like in the case if you held it for more then 3 years.
Types of Fixed Income Mutual Funds in India
Basically, Fixed Income Mutual Funds has different types based on its maturity as well as risks. So, here we are going to discuss some of types. (Fixed income mutual funds list)
- Liquid Funds: Liquid funds are for those who wants to invest for short-term debt which is up to 91 days with low risk.
- Ultra Short-Term Funds: It provides slightly longer maturity as compare, which is 3 to 6 months. It gives better returns as compare to liquid funds.
- Short-Term Funds: In short term funds, maturity is 1 to 3 years; while it has moderate risk.
- Corporate Bond Funds: In this you can invest in high-rated corporate bonds. In this returns may higher then government bonds.
- Dynamic Bond Funds: In this type of funds you can adjust your portfolio duration, basically you can adjust maturity based on interest rate as well as market conditions.
- Credit Risk Funds: Credit risk funds are use for invest in lower rated corporate bonds and has aiming for higher returns; while it carrying higher risk.
- Government Bond Funds (Gilt Funds): In Gilt funds you can invest only in government securities. It may safe but, it also sensitive to interest rate changes.
Fixed Income Mutual Funds Returns
So, here is a short comparison table for Fixed Income Mutual Funds Return. Which funds give a best return and what is the risk level at there.
| Fund Type | Average Returns (p.a.) | Risk Level |
|---|---|---|
| Liquid Funds | 5% – 6% | Low |
| Ultra Short-Term | 6% – 7% | Low to Medium |
| Corporate Bond | 7% – 8% | Medium |
| Gilt Funds | 6% – 8% | Medium |
| Credit Risk Funds | 8% – 10% | High |
There are different factors which affects in returns.
Factors Affecting Returns
- Interest Rate Movements – The movement of interest rate is affects like; falling rates may increase the bond prices and it can boosting returns.
- Inflation – In that, high inflation may reduces the real returns of the investors.
- Default Risk – In that case, if a bond issuer defaults then the fund may lose value of the investor.
Top 10 Fixed Income Mutual Funds in India 2025
There are some top performing fixed income mutual funds in India 2025. In which includes; Nippon India, ICICI pru, Axis, IDFC, Kotak and others. These different platforms offers different funds strategies, includes medium term plans, credit risks funds and different returns. SO, let’s see the differentiate with a comparison table.
| Fund Name | 1-Yr Return | Risk Level | Minimum SIP | Why Invest? |
|---|---|---|---|---|
| ICICI Pru Corporate Bond Fund | 7.8% | Low-Medium | ₹1,000 | High credit quality, consistent returns |
| SBI Magnum Gilt Fund | 7.2% | Medium | ₹500 | 100% Govt. securities, safe for long term |
| HDFC Corporate Bond Fund | 7.5% | Low-Medium | ₹1,000 | Strong fund house, low credit risk |
| Nippon India Corporate Bond Fund | 7.6% | Medium | ₹1,000 | Good for moderate risk takers |
| Axis Corporate Debt Fund | 7.4% | Low-Medium | ₹1,000 | Low expense ratio, stable returns |
| Kotak Corporate Bond Fund | 7.7% | Medium | ₹1,000 | Strong portfolio, good liquidity |
| ABSL Corporate Bond Fund | 7.3% | Medium | ₹1,000 | Trusted AMC, diversified holdings |
| Franklin India Corporate Debt Fund | 7.2% | Medium | ₹1,000 | Focus on high-quality bonds |
| UTI Corporate Bond Fund | 7.4% | Low-Medium | ₹1,000 | Balanced risk-reward |
| IDFC Corporate Bond Fund | 7.5% | Medium | ₹1,000 | Good for short to mid-term |
How to Use a Fixed Income Mutual Funds India Calculator
One of the important part of this fund is how much you can earn? Here is some basic details for calculation of fixed income mutual funds.
Steps to use the calculator:
- At first step you just need to enter the investment amount. for example; ₹1,00,000
- After that, select the type of fund. like; an example, Corporate Bond Fund.
- Then, you just need to enter expected return ratio: E.g., 7% p.a.
- And at last, enter the investment tenure. For example: 5 years.
After follow these above steps you can able to show the results like;
- Total Investment: ₹1,00,000
- Estimated Returns: ~₹40,255 (at 7% CAGR)
- Total Value: ₹1,40,255
Benefits of Fixed Income Mutual Funds
- Less Risky: This type of funds are less risky as compare to stock market funds or equity funds.
- Regular Earnings: some kind of funds pay money on monthly basis or some of pay on quarterly basis.
- Easily Access: You can withdraw your money easily and anytime in open-ended funds.
- Diversification: Your money is invested in many different bonds, so spread risk across multiple bonds.
- Tax Benefits: In this case, long-term capital gains tax is lower, if it held for more then 3 years.
Risks of Fixed Income Mutual Funds
- Interest Rate Risk: one of the risks of this funds is if interest rates go up, then bonds value go down.
- Inflation Risk: The money you earn might not grow as fast as prices.
- Credit Risk: In this case, there are some bonds might not pay back the money if the company is not that much strong.
- Liquidity Risk: Here is another risk is, some bonds can be hard to sell quickly if you have an emergency or need cash.
Conclusion
So, Fixed income mutual funds are one of the greatest way to earn a fixed returns with lower risk. If you are an investor, any retiree or looking for safe place to invest your money then, these funds can be a smart choice for you.
FAQs
What is the average return on fixed income mutual funds?
Typically 5% – 8%, depending on the fund type.
Are fixed income mutual funds safe?
They are safer than equity funds but carry some interest rate and credit risks.
How to choose the best fixed income fund?
Look for high credit ratings, low expense ratio, and consistent past performance.
Are fixed income funds better than FDs?
They offer better post-tax returns than FDs if held for 3+ years.
