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Which debt funds should one invest in for better post-tax return after the latest RBI policy?

Dhirendra Kumar talks about the factors to consider before choosing a debt fund

I have Rs 50 lakh, which I have received as proceeds from my bank FD. Kindly advise some debt funds to invest in for better post-tax return after the latest RBI policy. I do not require this money for at least another five years. I have stocks, pure equity, international funds, and gold as part of my portfolio.
- Venugopal

Today I'm very wary of the kind of debt funds we have, and the hidden risk associated with them comes as a surprise. So definitely look at Value Research Online before investing in a short-duration fund or a medium-term fund, even a money market fund.

Follow these two rules while investing in a debt fund. Firstly, don't take credit risk or any fund that has modest lower-rated corporate bonds. The Value Research page on each bond fund will provide insights into the portfolio and the credit quality composition. Secondly, don't chase the best-performing debt funds. Instead, focus on the portfolio. If you follow these two rules in any of the debt fund categories that you have chosen, I think your job will be done.

Moreover, debt funds are more tax-efficient as you don't need to pay taxes till you don't take your money out. If you are unlikely to need this money, unlike a bond, bond funds don't expire. They are not close-range structures, so you are not liable for any taxes till you redeem them. If you hold it for more than three years, you are entitled to the indexation benefit, which is great, and will reduce your tax outgo substantially.

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