Know how Aditya Birla Sun Life Income Growth scores above others in the fixed income category

The risk-averse investors flock up to debt fund instruments that allow them to earn well sans the market-related risks. For those keener to save to attain their financial goals, investing in fixed-income instruments serves best.

Take for example the Aditya Birla Sun Life Income Growth whose fundamental assets include fixed-income securities. Launched by HDFC Mutual Fund, this fund like most other funds in its category is an open-ended fund. You can stay invested in this fund for a prolonged period to earn good returns.

As per the guidelines stipulated by the Securities and Exchange Board of India (SEBI), investments in this fund come under the “Moderate Risk” category.

The Fund

Launched on October 25, 1995, the current assets under management (AUM) amount to ₹2248.51 crores. The risk factor is average in this open-ended fund is almost nil owing to fixed returns. This medium-sized debt fund charges a 0.86 per cent expense ratio.

The fund is benchmarked against the CRISIL Composite Bond Index and can be bought to earn long-term returns. Considering the low expense ratio charged by this fund, the returns from this debt to medium to long-duration fund are a bit higher compared to other funds in this category.

The minimum amount you can invest in this fund is ₹5000 in a lump sum while you can make an added minimum investment of ₹1000 in a lump sum in this fund. The minimum investment you can make through SIPs is ₹1000. This fund does not attract any exit load, which means that investors have nothing to lose post-fund redemption.

Fund performance

Many investors inquire why they must invest in this fund more than any other. A comparative analysis of most income funds in this category underscores the exceptionally high returns that investors have earned by investing in it.

Staying invested for a prolonged period yields returns exceeding most other bonds and government securities. This you can achieve by investing in this fund through systematic investment plans over a period ranging from 10 to 15 years. A comparison of this fund’s performance vis-à-vis other funds on regular monthly investments of ₹5000 in the past 10 years would have been earned.

Asset Allocation

Roughly 97.86 per cent of the fund’s holdings are in debt while 2.14 of the remaining capital is invested in other investment options. With a major portion of the fund’s money parked in debt instruments, this fund is best suited for investors who want to park their money for a long duration, but prefer to take less risk inherent in equity funds. 

The Returns Factor

The scheme earns around 5.69 per cent returns in a year while the absolute returns over five years are 7.16 per cent. Since its inception, investors have earned 9.21 per cent returns. 

Tax Treatment

If the fund’s units are redeemed within three years of investment, the profits will be added to the investor’s income, which will be then taxed as per the rates mentioned in the Income Tax slab.

For investors who redeem the fund units after three years of staying invested, gains will be taxed at 20 per cent post indexation benefits. 

Investors also earn dividends regularly from this fund. The dividend income from this fund will be added to the income of the investor who would then be taxed as per the respective tax slabs.

The fund house will deduct a TDS of 10 per cent on dividend income exceeding ₹5000 in any financial year.

Disclaimer: Mutual funds are subject to market risks. Please read the offer document carefully before investing. Also, the Securities and Exchange Board of India has stipulated the latest guidelines categorising this fund under the “Moderate Risk” category.