The best bond fund to invest in 2022

24 November 2022
4 mins read
Long-term bond funds generate stable returns on maturity. Learn about the best bonds to invest in 2022
The best bond fund to invest in 2022

Bond funds invest in various bonds and debt instruments, which are government, corporate, municipal bonds, convertible bonds, and mortgage-backed securities. 

A mutual fund primarily investing in bonds and debt securities is called the bond fund or debt fund. Investors buy bond mutual funds for low-risk steady income. Investing in these schemes is more effective for immediate diversification than buying individual bonds. However, a long-term bond has a higher interest risk than short-term bonds because of the inverse correlation between bond price and interest rate. Investors comfortable with the market’s fluctuating interest rate may invest in long-term bonds. But when it comes to investing, investors often struggle to select the best bonds to invest in India. 

Best Long Term Bond Funds

S.No. Long Term Bonds
1 Tata Income Fund Direct-Growth
2 ICICI Prudential Long-term Bond Fund Direct-Growth Plan
3 Nippon India Income Fund (Growth)
4 UTI Bond Fund Direct-Growth
5 LIC MF Bond Fund Growth

Performance of the best bond funds to invest

Tata Income Fund Direct-Growth 

The fund has holdings of the highest quality, with an average credit rating of the fund as AAA. The fund generated more returns than the benchmark -CRISIL Medium to Long Duration Fund All Index for three years. 

The exit load for the plan is zero.

ICICI Prudential Long-term Bond Fund Direct-Growth Plan

It is one of the top-ranking funds and generates consistent returns. The scheme generates regular income by investing 75 percent in bonds, debt, and balanced money market instruments. The average credit rating of the fund is AAA.

The exit load of the fund is zero. 

Nippon India Income Fund (Growth)

The scheme aims to generate capital appreciation for investors for optimal returns and moderate risk. The plan was made available to investors in 1995. The fund creates capital appreciation and is optimally consistent with medium risk, primarily in debt instruments.  

UTI Bond Fund Direct-Growth 

The fund generates optimal returns from investing in debt and money market instruments with a Macaulay duration of 4 to 7 years. The scheme has generated higher returns than the benchmark CRISIL Medium to Long Duration Fund All Index for three years. 

LIC MF Bond Fund Growth 

The scheme was made available in 1994 by LIC Mutual funds. The scheme primarily invests in debt instruments and around 20 percent funds in equities. It is some of the best long-term bonds. 

Factors to consider before investing in bond funds 

Interest rate risk

The performance of bond funds is directly related to the interest rate. In a declining interest rate situation, previously announced bonds are worth more. Similarly, newly declared bond funds attract more investors when the interest rate rises.   

Long-term bonds are more prone to changes in interest rate regimes.  

Expense ratio

The expense ratio is the total cost incurred during a debt scheme’s operation. Since the returns generated by the bond schemes have lower yields or higher upside than equity funds, investors must compare the expense ratios before applying.

Portfolio of credit risk

Debt instruments are at lower risk than equity investments but are still vulnerable to credit and interest rate risk. Debt securities are rated by credit rating agencies based on the issuer’s financial stability and track record of credit payment.

AAA debt instruments are considered the best and carry the lowest credit risk.


Acceptability of a debt fund is directly related to the interest rate risk. There is an inverse ratio between bond price and interest rate. Bond funds value more in a rising interest rate scenario. 

Bond funds are more sensitive to interest rates the longer the modified period is.


The amount is the anticipated return the debt fund will generate if everything remains unchanged. The asset manager can assume the fund to earn 9 percent returns for investors if the yield to maturity of a debt fund is 9 percent. But it would depend on the investment strategy employed by the fund manager. 


Invest in long-term bonds if you are ready to undertake credit and interest rate risks. Bond funds work excellently for low-risk investors because they are technically stable. Explore the best bonds to invest in India with Angel One. Open a free Demat account today and explore options in debt funds.

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory