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What kind of debt fund can give 9 per cent return?

Dhirendra Kumar tells where you should invest to get a return of 9 per cent


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What kind of open end debt mutual funds can return 9 per cent annual returns?
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Sanjay

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There are some open end debt funds which can give you annual return of 9 per cent. But mutual funds do not guarantee any kind of return like fixed deposits. There are some ultra-short bond funds which have returned 9 per cent last year. Even their five year average is 9 per cent. But I can't say whether they will be able to deliver this much return for sure.

If you are seeking a 9 per cent return in all probability from mutual funds, then you should consider Fixed Maturity Plans (FMPs). They are not open end, but but their return is almost locked. If you invest today in an FMP or a corporate bond fund for three years, you may get more than 9 per cent. But don't be too adamant for getting a return of 9 per cent. Even if you get 8.75 or 8.50 per cent by investing in mutual funds, it will be much better. Because if you invest in any one year deposit with a nationalised bank, the maximum you will get is around 8 per cent.Further the return (interest) will be completely taxable. The return from mutual fund would be treated as capital gains and the effective rate will be very less due to indexation after three years.

I think with the expectation of variation of up to 0.50 per cent in return, you should invest in a corporate bond fund. But before that make sure that, that fund you choose has invested in bonds with good rating and does not have a track record of making a mistake over the last five to seven years.

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