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Thinking Of Investing In an Income Fund? Here Are the Top Five Options to Choose From

Income FundsWhat are income funds?

Income funds are a debt mutual fund category that makes investments in corporate bonds, government securities, certificates of deposits and money market instruments. They are handled by skilful fund managers who aim at managing the portfolio according to interest rate fluctuations, while keeping the portfolio credit good enough.

To put it another way, income funds try to earn you returns during favourable as well as unfavourable interest rate scenarios, by actively managing the portfolio. They ensure good interest income by not just letting the instruments mature but also by selling them off in the debt market, when the prices are impressive.

Yes, these funds don’t ensure fixed returns like deposits do. But their performance over the past 10 years has been quite impressive. Here are a few income fund advantages you must invariably know about-

  • Income funds are highly liquid in nature, meaning, you can redeem them as and when required.
  • Returns are generated keeping the interest rate movement in view. In short, they are actively managed.
  • Income funds are extremely tax efficient, especially for employees under the 20% and 30% tax slabs.
  • You cannot just invest, but also redeem income funds systematically, which ensures a constant flow of cash for your needs. So, it may be inferred that income funds are a highly flexible kind of funds.

If you think investing in income funds is a good idea, then it would be valuable for you to learn about the top performing income fund schemes in India so that you can zero in on one, according to your convenience and financial goals. We have dished out below a list of the best 5 income fund plans for investment. Just check out-

1) HDFC Income Fund-Growth-

HDFC Income Fund-Growth is best suited for people who are looking for regular income over a medium or long period of time. It also aims at optimising returns by trying to strike a balance among yield, liquidity and safety factors, making investments in money market instruments and debt funds.

If we look at the table below, we will see that the scheme has shown impressive performance ever since its launch. While in the first year of its inception, it generated some 5.6 % of returns, in the third year it reached an all-time high of 10.32%. The fifth year’s performance saw a dip at 8.82%, which was, nevertheless, way higher than the returns it yielded in the first year. In the tenth year, the figures plummeted to 8.49%.

The overall percentage of returns the scheme yielded since its launch is 8.31. What’s most noteworthy here is that the overall performance shown by HDFC Income Fund-Growth is up to par.

HDFC Income Scheme Performance

Source : Swaraj Wealth Research

Now, let’s look at the graph below. It clearly indicates that the yearly performance of the mentioned scheme has been on the higher side through 2012 and 2016. Although, the values dipped in the years 2013 and 2015, they outstrip other income fund schemes by a large margin in the years 2012, 2014 and 2016, pointing at the fund’s brighter future.

HDFC Income Yearly Performance

Source : Swaraj Wealth Research

 

2) Aditya Birla Sun Life Income Plus – Growth – Regular Plan

Aditya Birla Sun Life Income Plus – Growth – Regular Plan is also an amazing option to try out if you are interested in an income fund investment. This plan aims at triggering consistent income flow by means of the yields they generate from their diversified investments on moderately risky instruments.

Looking at the scheme performance table below, we find that the performance of the scheme has been satisfactorily good since its inception. Although, the percentage of returns the scheme yielded in the first and fifth years of its inception was lower than the market average, its ‘since-launch return percentage’ value is considerably higher.

Aditya Birla Scheme Performance

Source : Swaraj Wealth Research

Now, look at the performance graph below. The yearly performance of the scheme is pegged at an impressive high for the year 2014, which also leaves behind the market average for other income funds. Yes, we notice a dip in the years 2013 and 2015, but the overall scenario is definitely pleasant.

Aditya Birla Yearly Performance

Source : Swaraj Wealth Research

 

3) ICICI Prudential Income Opportunities Fund – Growth

 This scheme aims at generating income by investing funds in a wide variety of money market instruments having different credit ratings and maturities, and debt funds. With the perfect balance of liquidity, yield and safety, the scheme tries to maximize income. This product is most suitable for investors looking for amazing savings solutions for the longer run.

The scheme performance table below for ICICI Prudential Income Opportunities Fund – Growth, gives us an idea how amazing an investment option it is. The scheme performed consistently better than the market average in the first, third and fifth years of its launch. With its ‘since launch return percentage’ value pegged at 10.15, it can definitely be inferred that future returns for this scheme are going to be impressive.

ICICI Prudential Income Scheme Performance

Source : Swaraj Wealth Research

The graph below shows that the yearly performance of the scheme has been standard from the year 2012 to 2016. While the returns crashed in the years 2013 and 2016, they did considerably well in the remaining years i.e. 2012, 2014 and 2015. A green flag for investors, for sure!

ICICI Prudential Income Yearly Performance

Source : Swaraj Wealth Research

 

4) SBI Magnum Income Fund-REGULAR PLAN-Growth

SBI Magnum Income Fund-REGULAR PLAN-Growth offers investors the opportunity to earn according to their requirements and financial goals. Investors benefit through regular dividends or capital gains. The returns, as claimed by SBI, would be higher for any investor, than the returns other comparable investment avenues are likely to yield.

The scheme invests money in bonds, government securities, corporate debentures, securitized debt, and market instruments. The investments are made by evaluating debt-issuer specific factors, macro-economic factors and market dynamics on a continuous basis.

Here is a table that illustrates the performance of the scheme in the first third, fifth and tenth years of its launch. The first year shows a whopping 10.34% returns against the 7.9% market average for that year. In the third year, the value is even more impressive at 10.75% as opposed to 9.84 percent of the other income funds’ average. Looking at the fifth year’s performance, we see that SBI with 9.15% returns takes over the market average marginally. In the tenth year, however, the scheme faces a setback, as it fails to outdo other income funds.

Resultantly, the return value for the scheme ever since its launch (7.91%), lags behind the market average (7.95%) marginally. If we look at the overall picture, it indeed has nothing to be overly disappointed about.

SBI Magnum Income scheme performance

Source : Swaraj Wealth Research

Now, delving into the performance graph below, we see that the scheme performed well in the years 2012 and 2016, with a slight dip in the yearly performance values for the years 2013, 2014 and 2015.

SBI Magnum Income yearly performance

Source : Swaraj Wealth Research

 

5) Reliance Income Fund – Growth Plan Growth Option

 The most important objective of this scheme is to generate favourable returns in sync with risk levels that are moderate. The investments are chiefly made in money market instruments and debt funds. Capital appreciation of the portfolio may complement the income.

Below is the performance table for the scheme. Taking a closer look at it, we find that the returns yielded by the plan ever since its advent is considerably higher than the average return obtained from comparable investment options. With occasional lows- during the first and the fifth years of the plan’s launch, and impressive highs during the second and tenth year, the overall performance of the scheme since its launch can be considered satisfactory.

Reliance Income scheme performance

Source : Swaraj Wealth Research

A glance at the yearly performance graph shows how the years 2012, 2014 and 2016 had been favourable for the reliance scheme. Although, we can witness a dip in its performance in the years 2013 and 2015, the plan can be considered one of the top performing income fund schemes we have today.

Reliance Income yearly performance

Source : Swaraj Wealth Research

Now, that you know about the top 5 income funds schemes, there is no reason why you shouldn’t seriously consider investing in any one of them. Income funds or exchange-traded funds (ETF) are quite a rage days and are actually beneficial. The sooner you realize this, the better is it!