ETMONEY Shares Insights on Debt Mutual Funds that can be Considered as an option for Short to Medium Term Investments.
Debt Mutual Funds
Debt fund is a Mutual Fund scheme that invests in fixed income instruments like corporate and government bonds, corporate debt securities, money market instruments etc. As compared to equity mutual funds, Debt Funds are less volatile. If you prefer investing in fixed income products like bank FDs, investing in Debt Funds can be a better option for you as they give higher returns than Bank FDs whose rate of interest is pretty low at present. ETMONEY, one of India’s largest platform for mutual fund investment throw light on how investing in Debt Mutual Funds can be a better option if you are looking for short to medium term goals. There are a few more points to understand before deciding on investing in Debt Funds, which are clarified in detail by ETMONEY. Read on to know more.
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How Are Debt Funds different from Equity Funds?
In terms of the way they function, debt funds are not different from any other mutual funds scheme but score higher than equity mutual funds where safety of invested capital is concerned. There are many advantages of investing in debt funds such as their low-cost structure, relatively stable returns, high liquidity, and safety, which makes it an option for investors who want to take comparatively lower risk with their mutual fund investments.
Are Debt Funds Completely Free from Risks That Other Mutual Funds Carry?
Debt funds carry comparatively less risk than market linked equity fund in the mutual funds sphere, but investors should be aware of the fact that like any other mutual fund, there are no guaranteed returns and even these carry some amount of credit risk. However, in comparison to other high performing equity schemes, this risk is low and hence is ideal for those who want higher returns than savings account and FDs without taking high risk of equity markets.
Conclusion:
As debt mutual funds are less volatile than equity funds, they are suitable for short to medium duration. They are more tax efficient too when compared to traditional investment options like bank FD if held for longer periods (3 years or more).
To know more about debt funds, visit https://www.etmoney.com/mutual-funds/debt.
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