Debt Funds
Invest in a diverse portfolio of fixed-income instruments for stable returns.
- No equity risk
- Stable returns on investment
- Suits different investment horizons
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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 you should invest in Debt Mutual 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 Mutual Funds
Funds Based On Duration
Overnight Fund
Securities mature in a day
Liquid Fund
Maximum maturity of securities is 91 days
Ultra Short Duration Fund
Bonds matures between 3 and 6 months
Money-Market Fund
Investment in money market securities with an investment tenure up to 1 year
Short Duration Fund
Macaulay duration of the fund ranges from 1-3 years
Medium Duration Fund
Maturity of bonds in between 3-4 years
Medium to Long Duration Fund
Maturity of bonds ranges from 4-7 years
Dynamic Bond Fund
Portfolio invests in securities across durations
Funds Based On Portfolio Allocation
Corporate Bond Fund
Portfolio invests primarily in corporate bonds
Credit Risk Fund
Investment in securities with the second highest credit rating
Banking and PSU Fund
Debt instruments issued by banks and PSUs
Gilt Fund
Investment in government securities
Gilt Fund with 10 year Constant Duration
Investment in government securities with Macaulay duration (weighted average time that a bond needs to be held for so that the total present value received is equal to the current market price) of 10 years
Floater Fund
Investment in floating rate instruments (instruments with interest rate that fluctuates with respect to a benchmark rate)
Understanding Debt Mutual Funds
How do Debt Mutual Funds work?
- Debt funds invest in debt instruments such as Corporate or Government bonds.
- Debt funds receive interest from these underlying debt instruments such as bonds.
- This interest gets added in the fund which result in NAV of these MF funds go higher.
- NAV price also increases or decreases based on the market interest rate.
Features of debt mutual 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.
What are the tax implications?
- SIP
Invest in a regular and disciplined manner every month with SIPs
- Lump sum
One-time investment at your convenience
Features of Lease Rental Discounting
Returns earned from debt mutual funds are taxed in your hands at your applicable tax slab rate.
Tax Planning
Save Tax, invest more,
reach goals
- Tax-saving options, one click
- Save tax under different sections
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Secure business loans
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FAQs On Debt Mutual 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.
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.
No! Debt funds will be taxed as per your income tax slab.
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