Looking to earn stable returns? Consider target maturity funds

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Target maturity funds are ideal alternative investment avenues for those who want stable and higher than bank FD returns, experts have said. Target maturity funds work as a good substitute for investors with a five-year-plus time horizon looking to earn more than bank fixed deposits, Viral Bhatt, founder, Money Mantra, told The Economic Times.

Returns on bank fixed deposits have steadily declined over time. Bank FDs now offer 5.0-5.5% interest on five-year deposits. Investors could earn about 5.9-6.3% from a target maturity fund with a tenure of about six years, experts have said.

Target maturity funds, open-ended funds, are a type of debt funds. Investors get their proceeds on maturity.

Credit risk associated with target maturity funds is considered low.

Long maturity bonds of 5-6 years can give returns that are 150 -200 basis points higher than short-term bonds, The Economic Times quoted Niranjan Avasthi, head (products), Edelweiss AMC, as saying. Investors in such target maturity funds that mature in the next 5-6 years could earn anywhere between 5.9% and 6.3%, he added.

According to the news report, Edelweiss Nifty PSU Bond Plus SDL Index Fund 2026 has a yield to maturity (YTM) of 5.90%. The new fund offer of ICICI Prudential PSU Bond Plus SDL 40:60 Index Fund has a yield of 6.25% while the NFO of Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund has yield-to-maturity of (YTM) of 5.93%.

It works well for investors whose goal matches the maturity of the fund, Nirav Karkera, head of research, Fisdom, is quoted as saying by The Economic Times.