A mutual fund scheme that invests in fixed income instruments such as government bonds, corporate bonds, and corporate debt securities is known as debt funds. They are also known as bond funds or fixed income funds.
Debt funds are an ideal investment option for those who are aiming for regular income options. They are less risky as compared to the equity funds, so you can expect good returns on your investment.
Some of the major advantages of debt funds are given below. They are as follows:
- Provide high security to the investors.
- They are highly liquid funds.
- They have stable returns as compared to other funds.
- Debt funds have a low-cost structure.
If you are planning to invest in debt funds, then you can refer to the tips mentioned below. They are as follows:
- When you are planning to invest in debt funds, avoid making decisions based on the ranking and history of the fund. The data based on past performance cannot guarantee the same returns in the future. You should research properly and analyze the funds properly before making the decisions.
- Debt mutual funds carry less risk as compared to others. They are not risk-free, so investors should research properly before investing their money.
- The expense ratio is one of the most important factors to consider before investing in debt funds. Investors should research the costs before evaluating the returns.
- Investors can evaluate the tax returns on the debt mutual funds before investing. They should research properly to avoid any consequences.
- Before investing the money, the investors should set their financial goals and design their portfolios according to them. A balance between liquid and non-liquid funds makes the availability of funds according to the requirements.
Who should invest in
- debt funds?
Debt fund investment is most profitable for the following. It is as follows:
- Investors aiming for regular income:
Debt funds are ideal for investors looking for a source of regular income, such as retired persons. The risk is slightly high, but with time the investors can expect steady returns on their money invested.
- First-time mutual fund investors:
The investors trying the mutual fund for the first time in their lives can consider debt funds as it is relatively safe compared to the equity funds, liquid, and provides better returns. In addition, it also provides the flexibility of withdrawing the money to the investors.
Conclusion:
If you plan to invest in debt mutual funds, start by researching properly. There are many types of debt funds in India that you can choose from. In addition, you can also consult a professional to gain required information such as risk factors, returns, etc., related to the funds.
