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Debt Funds
- No equity risk
- Stable returns on investment
- Suits different investment horizons
What are
debt mutual funds?
Debt mutual funds are those that invest a primary part of their portfolio in debt instruments and fixed-income securities. There is low risk and the returns are stable.
Why invest in debt funds?
Liquidity
If you are looking for short-term investments, debt funds can be a good place to park your funds without the risk of capital erosion.
Low risk
Since debt funds invest in fixed-income instruments, volatility risks are low and your capital is usually protected.
Stable returns
You can earn stable returns on investments with negligible chances of loss.
Suitability
You can choose from short-term, midterm and long-term debt funds based on your investment horizon.
Types of Debt funds
Funds Based On Duration
Table of Contents
What are Debt Funds?
Debt funds are mutual fund schemes that invest primarily in debt securities. Debt securities are those that offer fixed income on investments such as government bonds, corporate bonds, debt securities, etc. As such, debt funds have a low risk of suffering volatility and offer moderate returns.
How do debt funds work ?
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Debt funds invest in debt instruments such as Corporate or Government bonds.
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Debt funds receive interest from these underlying debt instruments such as bonds.
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This interest gets added in the fund which result in NAV of these MF funds go higher.
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NAV price also increases or decreases based on the market interest rate.
Features of debt funds
- Regular Income
- Less volatile
- Steady return with lower risk
- High Liquidity
How to invest in debt mutual funds?
Use the ABCD app and invest in debt funds in a few clicks. Choose your investment mode - SIP or lump sum and start your investment journey.
SIP
Invest in a regular and disciplined manner every month with SIPs
Lump sum
One-time investment at your convenience
What are the tax implications?
Returns earned from debt mutual funds are taxed in your hands at your applicable tax slab rate.
Secure retirement with Life Insurance
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Secure regular pensions
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Save on taxes
Invest and secure with ULIPs
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Market-linked returns
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Flexibility: withdraw, switch, top up
FAQs On Debt Funds
A debt fund is a type of mutual fund that invests in fixed-income instruments like government and corporate bonds. They offer stable income, risk diversification, and liquidity. Returns come from interest and capital appreciation, with taxation based on the holding period, making them versatile for various investment goals.
The decision to invest in a debt fund depends on your financial goals and risk tolerance. If you prioritize stability, regular income, and lower risk, a debt fund can be a good choice. However, if you seek higher returns and are willing to tolerate more risk, you might consider other investment options such as equities funds. It's essential to align your investment decisions with your specific financial objectives and risk preferences.
Fixed Deposits (FDs) are typically considered safer with fixed interest and deposit insurance, whereas debt funds entail some risk due to credit risk and interest rate fluctuations.
Debt funds can be well-suited for conservative investors seeking higher interest than traditional Fixed Deposits. They are also suitable for those with a 1-3 year investment horizon and investors looking to diversify their portfolios, balancing equity risks with the stability of debt instruments. Ultimately, the decision depends on individual goals and risk tolerance.
No! Debt funds will be taxed as per your income tax slab.
Other asset class funds
ETF Funds
Invest in funds listed and traded on the stock exchange
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Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
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Hybrid Funds
Get a mix of equity, debt and other asset classes for a diversified portfolio
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Index Fund
Passively-managed mutual funds tracking a particular index
Know More