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Best Debt Funds To Invest In India For 2023

We've curated a list of the best debt funds that you can invest in. Read the blog to find out which debt funds can help you achieve your financial goals.
October 26, 2023

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What the best debt mutual fund in the market is, depends on you more than the debt fund. Confused? Well, to pick the best debt mutual fund for oneself, one has to first understand what your financial goals are, what your risk profile is, what other funds you have in your portfolio, among other things.

To start with, you need to ensure you know what the difference between debt, equity or hybrid funds is. Because while all types of mutual funds are good investment tools, they may not be suited to your needs.

What Is A Debt Mutual Fund?

A debt fund is a mutual fund that invests only in fixed income securities like bonds and treasury bills. These are considered safer than equity funds and are ideal for those who have a more conservative approach to investment.

That's not to say that aggressive investors can't benefit from having debt funds in their portfolio. In fact, investors with an above average risk appetite have been known to invest in liquid funds (a type of debt fund) as a part of their emergency fund. You can consult a Cube Wealth coach or download a Cube Wealth App

Furthermore, debt funds are generally viewed as short to medium term investments that are suitable for financial goals ranging from the immediate future to 3-5 years. Within the world of Debt Mutual Funds, you will find several investment options. Let’s take a look at them.

Types Of Debt Mutual Funds

Gilt Funds

These funds invest in low-risk debt like government securities which lead to slightly better returns than your average savings account.

Monthly Income Plans (MIPs)

These are actively managed mutual funds that focus on generating immediate income, either on a monthly basis or quarterly basis. They use a mix of government bonds, municipal bonds, corporate bonds, and dividend stocks etc.

Short Term Plans (STPs)

As the name suggests these are short term, open-ended plans. They invest in assets that have a maturity of minimum 15 – 91 days or lesser. Once again, a low-risk low-return tool.

Liquid Funds

These funds invest in very short-term market instruments like treasury bills and government securities. One reason to love these is that they offer more returns than your savings bank account but offer similar liquidity in case you need to take the money out during an emergency.

Fixed Maturity Plans (FMPs)

These are close-ended, so you can only invest in them when a new fund offer comes out. Fixed maturity plans involve fixed time period post which you’re investment matures. They invest across debt-based instruments like well-rated securities and corporate bonds.

Investment Facts

Who Should Invest in Debt Mutual Funds?

The ideal investor for Debt Mutual Funds would be the one looking for

1. Higher Gains

If you’re simply looking to move surplus funds from your savings account for higher gains, debt funds may be your cup of chai.

2. Short Term Returns

These are ideal for you, if you’re after short term returns and are not fussed over low returns.

3. Low Risk

If you are skeptical about the risk, investing in debt funds that carry low risk should be a good option for you. The lower risk attracts many but you must then be patient and not second guess yourself when your colleagues talk about their equity fund returns.

Top 10 Best Debt Mutual Funds in India

Our team of world-class advisors from Wealth First helped us build this list based on their mutual fund selection process, undertaken using two parameters:

Qualitative Parameters:

  • AMC comfort – Pedigree, Credibility, Compliance, Process and Ability to Retain Top Management & Talent
  • Fund Manager comfort – Experience, Reputation, Performance and Continuity Record (We have had 170+ investment and marketing team interactions in the last 1 year)

Quantitative Parameters:

  • Scheme Aesthetics – Fund Size & Recent AUM Growth, Concentration Analysis, Clarity of positioning
  • Performance – Historical performances (SIP, Last 20-Quarters, 3-Year, and 5-Year Numbers), Risk-adjusted returns, Sharpe, Beta, and Other Statistical Ratios
  • Negative Criteria – Cash Calls, Outlier Performances, Recent Management Changes, etc.

Best Debt Mutual Funds For 2023

Given below are our current recommendations of Top 3 Best Mutual Funds for 2023, given by our wealth advisors – Wealth First. However, we suggest you do not invest in any funds without consulting a Cube Wealth Coach. Simply email us and get free investment advice or download the Cube Wealth App.

The Best Debt Mutual Funds For 2023 are: 

1. Bandhan Banking & PSU Debt Fund

2. HDFC Ultra Short Term Fund

3. ICICI Prudential Corporate Bond Fund

4. Axis Banking and PSU Debt Fund

5. Bandhan Ultra Short Term Fund

6. Bandhan Dynamic Bond Fund

7. Axis Money Market Fund

8. HDFC Money Market Fund

While we update our blogs regularly, we recommend you download the Cube Wealth App to see the latest and most accurate data.

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How To Evaluate Best Debt Mutual Funds?

You can look at the historical returns of a fund over different time frames and compare them with its competition. You can also look at the credentials and experience of the fund manager, whether they have been managing a particular fund from the start or if there has been a recent switch.

Another thing to keep in mind is understanding the quality of the investment that has been made by the fund. It is best to consult a wealth advisor for this purpose.

How To Invest in Debt Funds?

You can easily invest in a debt fund by following the steps given below:

  1. Download the Cube Wealth App
  2. Select risk level as low
  3. Select the time frame as short
  4. Enter the amount you want to invest
  5. Browse recommended funds
  6. Tap Invest

For further assistance with documentation or if you have any questions, please EMAIL A CUBE WEALTH ADVISOR.

Explore Debt Funds On Cube Wealth Now

Investment Tips

FAQs Around Debt Funds Investment

Q. Is It Good To Invest In Debt Funds?

Ans. Debt funds are considered safer than equity funds and are ideal for those who have a more conservative approach to investment. Also, if you are looking to move surplus funds from your savings account for higher gains, then debt funds would be your answer.

Q. How Can I Invest In Debt Funds?

Ans. The best way to invest in debt funds is through an app like Cube Wealth. Simply download the app now to begin investing.

Q. How Much Should I Invest In Debt Funds?

Ans. Debt funds help invest in various debt instruments, some of which are not available for direct purchase by retail investors. The minimum amount required here is usually very high, so debt mutual funds are the ideal way to invest in them. The amount you invest in debt funds, therefore, depends on your risk appetite as well as investment duration and accordingly the type of debt fund that you would end up investing in.

Q. Are Debt Funds Safe?

Ans. Every type of mutual fund comes with its own set of risks. Thus, debt funds too have some risk attached to them. However, when compared to other types of funds, debt funds are relatively safe.

In addition to picking the best debt funds to invest in, you can also utilize this video by Team Cube. It helps understand how you can make the perfect portfolio.

These are Cube Wealth’s top picks for the best debt funds of 2023. We update our lists regularly but recommend you connect with one of our experts through the Cube Wealth App before making any investment decisions.


In conclusion, choosing the best debt funds to invest in is a crucial decision that should be aligned with your specific financial goals, risk tolerance, and investment horizon. The diverse range of debt fund categories, from liquid funds for short-term needs to dynamic bond funds for long-term growth, allows investors to tailor their portfolios to their unique requirements. You can consult a Cube Wealth coach or download a Cube Wealth App

Note: Always invest after analyzing your financial goals, investment horizon, and risk appetite.

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Rishabh P Nair
Rishabh P Nair is the Head Of Brand Content at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. Rishabh has been weaving stories for over 10 years and prides himself on building brands with a strong identity.

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