Which debt mutual fund is safe to invest?

I am 27 years old. I am investing in equities through mutual funds. I have three multi cap and one mid cap scheme in my portfolio and I am content with their performance. I want to add some debt to my portfolio. But due to the recent defaults in debt mutual funds, I do not want to add debt funds to my portfolio. Which is the other best and safe debt investment option? Should I invest in PPF at this age given it has a long maturity term of 15 years?

–Suresh K. Mathur

By Divam Sharma, co-founder at Green Portfolio

You can add GILT debt mutual fund schemes to your investment portfolio. These debt funds invest in Government of India securities which are 100% sovereign backed and are the most safe instruments. As defined by Sebi, a Gilt fund is an open-ended debt scheme investing at least 80% of its total assets in government securities across maturities.

In a longer term (say over 1 year period) you can earn approx. 8% returns from your investment in Gilt mutual funds. They generate a higher return in a falling interest rate regime. In the last 1 year, Gilt debt funds have generated 12-13% returns.

Globally, interest rates are falling and are even negative in some countries. Considering safety, these bonds are issued for 10-30 years and hence ensure consistency of returns; and one can easily liquidate the investments whenever needed, Gilt funds are the best alternative for your investment needs.

(Views as expressed by the expert.)

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