Debt mutual funds, also known as debt funds, invest in a mix of debt investments such as treasury bills, government securities (G-Secs), corporate bonds and money market instruments. While debt funds invest in debt securities of different maturities, but each security has a fixed maturity date and interest rate. This makes debt mutual fund a lower risk investment compared to other mutual funds like equity funds. Debt funds manage this risk generally by investing in debt securities rated by reputed credit rating agencies. Income for debt funds arise due to interest income and capital appreciation of debt securities.
Who can benefit from Debt Fund Solutions?
Debt mutual funds work for those investors with a low to medium propensity for risk and seek high liquidity. Since debt funds provide tax-efficient returns, they are ideal for first time mutual fund investors. They can also provide regular income, which may be beneficially to the retired individuals.