Aditya Birla Sun Life Debt Mutual Funds

Investment Objective

Aditya Birla Sun Life Debt Mutual Fund's investment objective is to offer regular income and capital safety over the short to medium term. Such funds invest in securities generating fixed income, such as government securities, treasury bills, and other money market instruments. Every debt securities hold a defined credit rating issued by a rating agency. 

Such ratings are beneficial in measuring the credibility of the issuer concerning the repayment of interest and principal when the fund matures. The fund manager picks the debt securities based on the investment objective and underlying ratings of the mutual fund. 

A debt fund investor earns returns via interest income and a gradual increase in the price of the fund over the said period. Nevertheless, the Aditya Birla Sun Life MF Debt fund doesn’t assure that it will achieve the investment objective. 

Risks Involved in Aditya Birla Sun Life Debt Mutual Funds

Debt funds are exposed to specific kinds of risks. These mainly consist of the following:

• • Default/Credit Risk: Such a risk specifically arises when the borrowers of debt instruments invested in the fund either default in principal amount repayment or default in making interest payments.
  • Duration/Interest Rate Risk: This kind of risk occurs due to the inverse relation between debt instrument prices and market interest rates. It implies that if the interest rate increases, their prices will fall and vice versa. The longer the investor is invested in the fund, the higher the risk. 

Return Potential of Aditya Birla Sun Life Debt Mutual Funds 

Returns are typically the result of the risk assessed by investors. As compared to traditional fixed-income investments, Aditya Birla Sun Life MF Debt funds yield higher returns. 

As per reports, such funds have delivered around 7% to 10% of average returns for 5 years. 

The duration of fund and credit ratings affect the level of returns to greater extents. Low-rated funds such as Credit Risk Funds generate higher returns to requite for the level of risks involved with debt funds. 

On the contrary, Corporate Bond Funds categorised as high-rated funds, generate relatively lower returns owing to their low-risk profile. Likewise, Gilt funds — a long-duration fund renders higher returns as compared to short-duration funds. 

Nevertheless, Aditya Birla Sun Life MF Debt fund doesn't offer any assurance of assured returns. Furthermore, the performance of the fund may differ from one period to another.

Who Should Invest in Aditya Birla Sun Life Debt Mutual Fund ?

Aditya Birla Sun Life Debt Mutual Fund is suitable for conservative investors with the following investment objectives:

• Have short-term goals such as vacation planning, buying a car, etc.
• Seeking tax-adjusted returns
• Want capital preservation

Besides, the fund could be beneficial for retirees. It offers tax-efficient regular cash flows through systematic withdrawal plans. Such a fund could also prove advantageous in the diversification of an investor's portfolio. It will mitigate the overall risk of an investment portfolio. 

Aditya Birla Debt Fund can also be used to transfer small amounts at certain intervals to equity funds. Investors willing to invest a lump sum amount in stocks can do so through a systematic transfer plan. By doing so, investors can avail of the benefits of rupee cost averaging. 

Things to Consider Before Investing in Aditya Birla Sun Life Debt Mutual Funds 

The investor must consider the following parameters before investing in Aditya Birla Sun Life Debt Mutual Fund:

• As an investor, you must gauge the risk-to-reward ratio. It will help you determine the amount you should invest in the fund. 
• It is crucial to evaluate the expense ratio of the mutual fund before parking the money in the fund. 
• Investors must pick the right debt mutual fund that aligns with their investment objectives. 

Tax Levied on Aditya Birla Sun Life Debt Mutual Funds

Aditya Birla Sun Life Debt Mutual Fund is taxable to the degree of redemption gains. Following are their taxability on redemption:

• For investments held for less than 3 years: Such capital gains are short-term gains. Hence, these gains are taxed at regular slab rates relevant to the investor.
• For investments held for more than 3 years: Such capital gains are taxed as long-term gains, and after indexation benefit, these are taxed at a tax rate of 20%.