A debt fund is a type of mutual fund that invests in fixed income instruments like government bonds, treasury bills, commercial papers, etc. Along with helping in capital appreciation, debt funds offer high liquidity, stable returns, tax benefits, and are relatively safer than many other investment avenues.
Types of debt funds available for you as an investor
Some of the popular categories of debt funds are listed below.
- Liquid Funds: These are Liquid mutual funds that invest their investment corpus in money market securities with maturity of up to 91 days only.
- Ultra Short Duration Funds: These MF schemes invest in debt and money market instruments that have maturity periods ranging between 3 months and 6 months.
- Short Duration Funds: These schemes invest in debt securities having a maturity period ranging between 1 year and 3 years.
- Dynamic Bond Funds: There are certain funds that invest in securities having a mix of longer and shorter maturity periods. These are known as dynamic bond funds.
- Gilt Funds: Gilt funds are mutual funds that only invest in securities issued by the government.
How do debt funds work? Are they for you?
Debt funds invest in different fixed-income securities where a fund manager makes sure to balance the returns by investing in high-rated securities. Here, an entity disburses some interest on the debt security and, on maturity, pays off the principal.
When it comes to growing your wealth, debt funds need not be the only option that you consider. There are other investment avenues, like mutual funds and stocks, that could help you to reach your financial goals, be it short-term or long-term. Exploring your investment options through a financial expert is a prudent way to get to know about more options to park your savings and to proceed with your investments. An expert will curate investment plans that are based on your appetite for risk, financial standing, goals, investment horizon and age.
Explore options to grow your wealth by reaching out to an expert today!
