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Debt Funds
What exactly is a debt fund?
Purchasing a debt security is analogous to providing a loan to the organisation issuing the security. A debt fund makes investments in fixed-interest yielding assets such corporate bonds, commercial paper, government securities, treasury bills, and other money market instruments. Earning a consistent interest income and capital growth is the main goal of investing in debt funds. The interest rate and maturity time for debt instruments are defined by the issuers. As a result, they are often referred to as “fixed-income” securities.
Advantage of a debt fund
The following are the main advantages of funding these funds:
Market Volatility Resistant – A debt mutual fund is resistant to market volatility, whereas equities mutual funds, which are susceptable . A set maturity date and an interest rate are features of the securities in which investments are made.
Portfolio Stabiliser – Your portfolio will be more stable thanks to these schemes since the risk involved with debt instruments is smaller than that of equity instruments.
Excellent for newbie investors: Most new investors begin with a low-risk appetite. Debt mutual funds are an excellent investment option for such individuals. There are consistent returns without the risk of losing everything if the markets fall.
High liquidity: Investing in these funds might be an excellent strategy to save money for an emergency. You may always redeem the investment if you need money right now.
Aids in the achievement of investing goals: Debt funds have a predetermined maturity time and provide low but consistent returns. If your short-term investment goal is to establish a corpus for a future expenses, a debt mutual fund is an excellent choice.
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