Looking for steady growth with lower risk than equity? Long-term bond funds can help. These funds invest in high-quality, longer-maturity bonds (often Govt. of India G-Secs and AAA corporates). They do well when interest rates fall or stay stable. If you can hold for 3–5 years or more, these can be a smart core holding.
7 Best Long-Term Bond Funds in India
Use this table as a simple shortlist. Numbers change often, so check the latest factsheets before investing.
| Fund Name | Category | AUM (₹ Cr) | Direct Expense | YTM (%) | 1Y | 3Y | 5Y |
|---|---|---|---|---|---|---|---|
| Nippon India Nivesh Lakshya Fund | Long Duration | 9,600+ | ~0.33% | ~7.2 | ~5–6% | ~9–10% | ~6–6.5% |
| HDFC Long Duration Debt Fund | Long Duration | 5,800+ | ~0.30% | ~7.3 | ~5% | ~9% | NA |
| SBI Long Duration Fund | Long Duration | 2,500+ | ~0.28% | ~7.2 | ~5% | ~9–9.5% | NA |
| ICICI Pru Long Term Bond Fund | Long Term Bond | 1,100+ | ~0.43% | ~7.4 | ~7–8% | ~9% | ~6–8% |
| Axis Long Duration Fund | Long Duration | 300+ | ~0.32% | ~7.3 | ~5% | ~9% | NA |
| ABSL Long Duration Fund | Long Duration | 150+ | ~0.43% | ~7.3 | ~6–7% | ~9% | NA |
| UTI Long Duration Fund | Long Duration | 90+ | ~0.30% | ~7.2 | ~4–5% | ~8.5–9% | NA |
Note:
- YTM is not a guaranteed return. Actual returns depend on rate moves, accrual, and costs.
- “Long Duration” funds typically hold 7+ year maturities; NAVs can move more when rates move.
Who Should Invest in Long-Term Bond Funds?
- Investors with a 3–5+ year horizon.
- Those who want lower risk than equity but better potential than savings accounts or ultra-short funds.
- People who think interest rates have peaked or could fall over the next few years.
- Investors building a balanced portfolio who need a stable debt anchor.
Advantages of Bond Mutual Funds
- Lower volatility than equity over time.
- Professional management of duration, reinvestment, and portfolio roll-down.
- Diversification across Govt. and top-rated bonds; you avoid single-issuer risk.
- Liquidity and transparency vs. buying a single long-dated bond directly.
Key Points to Remember Before Investing
- Interest rate risk: Long-duration funds can be volatile if rates rise; match your time horizon.
- Don’t chase YTM: It’s a snapshot, not promised returns.
- Quality first: Prefer funds heavy on G-Secs/AAA to reduce credit risk.
- Keep costs low: Direct plans help; fees compound over time.
- Enter gradually: Use SIP/STP if rate direction is uncertain. Review once a year, not daily.
Simple Ways to Use These Funds
- Core debt anchor: 20–40% of a balanced portfolio, alongside equity funds.
- Rate-cut opportunity: Add tactically when you expect RBI cuts in the next 12–24 months; hold through the cycle.
- Barbell idea: Pair a long-duration fund with a short/ultra-short fund to smooth ups and downs.
Conclusion
Long-term bond funds are a solid pick in 2025 for patient investors. If rates stay steady or move lower, they can deliver attractive, tax-efficient growth compared to short-term debt options. Choose high-quality, low-cost schemes, invest gradually, and stay for 3–5+ years to let the interest-rate cycle work for you. Align with your goals and review annually.
Learn More:
- How to Start Investing in Mutual Funds in India – Step-by-Step Process for Beginners
- Difference Between Mutual Funds and Stocks – Which is Better for Beginners?
- Understanding NAV (Net Asset Value) in Mutual Funds – What It Means and Why It Matters
- Risks Involved in Mutual Fund Investments – Common Risks and How to Manage Them
Disclaimer: Debt mutual funds carry interest rate and reinvestment risk. Past performance doesn’t guarantee future results. Consider consulting a SEBI-registered advisor before investing.
