Target Maturity Funds (TMFs) are a type of debt mutual fund that helps investors navigate interest rate risk. These passive debt funds have a maturity date. The portfolio of the target maturity fund comprises the bonds that are part of the underlying bond index. Also, these bonds have a similar maturity as the fund’s stated maturity.
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Below are the best target maturity funds in india:
BHARAT Bond FOF - April 2031 Direct (G) is a Debt fund that has delivered a 1 Year return of 9.3% and a 3 Years return of 6.2%. The fund has an expense ratio of 0.1% and an AUM of ₹4627 crores as of 2024-12-22. It was Launched on 2020-07-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 097.20% to debt and 2.79% to other assets.
Kotak Nifty SDL Apr 2027 Top 12 Equal Weight Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.4%. The fund has an expense ratio of 0.2% and an AUM of ₹7938 crores as of 2024-12-22. It was Launched on 2022-02-11. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.46% to debt and 1.54% to other assets.
BHARAT Bond ETF FOF - April 2032 Direct (G) is a Debt fund that has delivered a 1 Year return of 9.2% and a 3 Years return of 6.5%. The fund has an expense ratio of 0.1% and an AUM of ₹4568 crores as of 2024-12-22. It was Launched on 2021-12-15. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.01% to debt and 3.99% to other assets.
Bandhan CRISIL IBX Gilt April 2028 Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.0% and a 3 Years return of 5.8%. The fund has an expense ratio of 0.2% and an AUM of ₹4733 crores as of 2024-12-22. It was Launched on 2021-03-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.28% to debt and 1.72% to other assets.
Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.9% and a 3 Years return of 5.6%. The fund has an expense ratio of 0.2% and an AUM of ₹9823 crores as of 2024-12-22. It was Launched on 2021-09-24. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.22% to debt and 1.78% to other assets.
BHARAT Bond FOF - April 2030 Direct (G) is a Debt fund that has delivered a 1 Year return of 9.0% and a 3 Years return of 6.3%. The fund has an expense ratio of 0.1% and an AUM of ₹6869 crores as of 2024-12-22. It was Launched on 2019-12-27. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 096.21% to debt and 3.79% to other assets.
Bandhan CRISIL IBX Gilt June 2027 Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 7.8% and a 3 Years return of 5.6%. The fund has an expense ratio of 0.2% and an AUM of ₹7101 crores as of 2024-12-22. It was Launched on 2021-03-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 097.54% to debt and 2.46% to other assets.
ICICI Prudential Nifty PSU Bond Plus SDL Sep 2027 40:60 Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.3% and a 3 Years return of 5.6%. The fund has an expense ratio of 0.2% and an AUM of ₹8652 crores as of 2024-12-22. It was Launched on 2021-09-28. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.09% to debt and 1.91% to other assets.
Axis CRISIL IBX SDL May 2027 Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 8.4%. The fund has an expense ratio of 0.2% and an AUM of ₹2220 crores as of 2024-12-22. It was Launched on 2022-02-23. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 098.45% to debt and 1.56% to other assets.
Kotak Nifty SDL Apr 2032 Top 12 Equal Weight Index Fund Direct (G) is a Debt fund that has delivered a 1 Year return of 10.2%. The fund has an expense ratio of 0.2% and an AUM of ₹2904 crores as of 2024-12-22. It was Launched on 2022-02-11. The minimum SIP investment is ₹1000 and the minimum lump sum investment is ₹5000. The fund allocates 097.29% to debt and 2.71% to other assets.
Target maturity funds offer returns closer to the YTM if the investments are held till maturity. In addition, the fund generates accrual returns. Thus, the changing interest rates do not impact the fund’s total returns on maturity. The best target maturity fund largely depends on the investor’s goal and investment horizon. Target maturity MFs are available from 1 year to 15 years. Thus suitable for short, medium and long-term goals.
For example, a target maturity MF of September 2026 holds bonds that mature close to September 2026. The fund’s returns are close to the YTM when held to maturity. Thus, the best target maturity fund will be the one that aligns with your investment horizon and offers a higher net YTM.
Net YTM = YTM – Expense Ratio.
The following are the Best Target Maturity Funds
The current economic scenario indicates inflation risk, liquidity measures and no further rate cuts from RBI. In such scenarios, it is best to opt for investment options that help you generate more or less stable returns. Thus, investing a portion of your money in low-risk schemes that match your investment horizon will help in generating good portfolio growth.
Target maturity funds suit a variety of investment horizons. They are available for short, medium and as well as long-term goals. However, liquidating these investments before maturity may attract interest rate risk. Only when you hold these funds to maturity will you be able to enjoy returns closer to the YTM.
Yes, target maturity funds are a good investment when the interest rate scenario in the country is unfavourable. These funds offer a reasonable predictability of returns. Moreover, TMFs mimic the underlying bond index and invest in bonds with similar maturity as the fund’s stated maturity. As a result, investing in these funds has a greater potential to generate higher growth than tax-free bonds. Historically, yields of tax-free bonds are in the range of 4.9% to 5%. While target maturity MFs are offering better returns at around 6.8% to 6.9%.
Furthermore, investors can benefit from indexation when investing for more than three years. Thus, the returns you generate from this scheme can be tax efficient.
Moreover, these funds have a relatively lower level of risk. However, this is not the only benefit of target maturity funds. They are suitable for investors not just looking for predictable returns but also for capital preservation.
Target maturity funds are debt funds that invest in bonds with a similar maturity. These are passive funds that mimic the underlying bond index. The portfolio comprises bonds with maturities that align with the fund’s stated maturity.
Target maturity MFs are passive debt funds that track the underlying bond index. TMFs have a homogenous portfolio, as the fund invests in bonds with a similar maturity. The bond is held until maturity, and all the interest payments during the holding tenure are reinvested into the fund. Therefore, target maturity MFs operate in accrual mode.
Currently, these funds invest only in government securities, PSU bonds and State Development Loans (SDLs).
TMFs are suitable for investors looking at predictable returns in the medium to long term. These are low-risk investment options that also protect the investor’s capital.
Yes, the return from TMFs is more or less predictable since the fund holds bonds with a similar maturity. Moreover, the returns are predictable only when the investments are held up to maturity. Investors can expect returns close to the YTM of the fund. In the case of earlier withdrawals, the yield may be lower.
Target maturity MFs are more tax efficient than traditional investment options. These funds are taxable, like debt mutual funds. If the investment horizon is more than three years, the returns are taxable at 20% with an indexation benefit. For an investment horizon of less than three years, the returns are added to the investor’s taxable income and are taxable at the applicable slab rate.
