What are mutual fund debt funds?

Most of the investors do not know the advantages of investing in debt funds.

This type of debt fund offers high liquidity and usually invests in short-term money market securities.


Are you a mutual fund investor who plans to add stability to your investment portfolio? Mutual funds are one of the most preferred investment options in India. The main reason behind the popularity of this investment instrument is the different schemes that it offers. Different types of mutual fund schemes are available to invest, and debt mutual funds are among them. People prefer this fund as it gives you the freedom to redeem their money whenever they want. Read this post to get an idea about the debt mutual funds.

Debt mutual funds

Debt mutual funds are a good investment option for those who wish to improve the overall value of their investment portfolio. Usually, retail investors consider equity funds when they plan to invest in mutual funds in India. But most of them do not know the advantages of investing in debt funds as it is a great way to augment your investment portfolio. Debt funds are a good investment instrument that mainly invests in corporate bonds, certificates of deposits, government securities, T-bills, and commercial paper. There are different debt and money market instruments if you choose debt mutual funds to invest your money.

This type of mutual fund called ‘debt’ funds as the issuers borrow money against these instruments from lenders. Come with various maturities, debt funds can generate income at maturity or periodically. Retail investors cannot purchase debt instruments directly as the high amount required for its purchase. But they can invest their money in such funds to generate returns. When interest rates fall, these funds provide a capital appreciation for its investors. Different kinds of debt funds are available, and an investor can choose the right one based on his or her investment goals and risk appetite.

Different types of debt funds

Debt mutual funds are ideal investment instruments which invest in a mix of fixed-income and debt securities. You can choose appropriate debt mutual funds to include in your investment portfolio based on your investment goals. Take a look at the different types of debt mutual funds:

Liquid funds: This type of debt fund offers high liquidity and usually invests in short-term money market securities.  It invests in securities that mature within 91 days. It is ideal for those who plan to park their money for a short period of time.

Overnight funds: These funds invest in securities that have an investment horizon of one day. It is a safe investment option as it has minimal interest variations.

Short duration funds:  These are relatively low on risk, and the money invests in debt and money market instruments. It usually matures anywhere between one and three years.

Ultra short-duration funds: This type of debt fund matures anywhere between three and six months. Invest in debt and money market instruments, these funds offer high returns to investors with relatively low interest-rate risk.

Gilt funds: The major portion of the corpus of this fund invests in government securities which carry relatively no credit risk.

Corporate bond funds: Corporate bonds are another type of debt fund which is suitable for investors who look for a save investment avenue to park their money for a fixed but high income.

Fixed-maturity plans: These are closed-ended debt funds suited for this who seeks income generation with minimal duration risks.

Debt funds are a great option for people who wish to add stability to their investment portfolio. By investing in this mutual fund scheme, your investments are not affected by the volatility of the equity market. The underlying assets of debt mutual funds are fixed-income securities like treasury bills, bonds and government securities. By investing in this mutual fund instrument, an investor can get an interest income regularly along with the chances of capital appreciation. Choose the right debt fund scheme based on your overall investment goals if you plan to include them in your investment portfolio to add stability.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”,  so let me do Nivesh