Debt Fund
What are Debt Funds?
Investment in the Indian context is not restrained either by industry or types. Owing to this, the field of Mutual Funds today comprise of innovative instruments like “Debt Mutual Funds” where the investment corpus is a mix of debt or fixed income securities such as Treasury Bills, Govt Securities, Corporate Bonds, Money Market instruments and other debt securities. In addition to their types, they also have varied tenors from those ranging for just days to those going up to years. Returns in most cases is fixed like a FD interest.
Like equities, debt mutual funds too are assigned ratings by agencies to show their capability in terms of returns, timely return of interest, growth of funds, timely return of principal etc.
Myths about Debt Funds
- Investing in debt funds leads to zero risk
Agreed that debts have lower risks than equities but that does not mean the risks are zero! Where a Debt Mutual Fund has in its portfolio debt funds which have doubtful returns and don’t give interest on time, the risks do go up! - Debt Funds require huge investments and are meant for institutions
This statement is true only where one tries to procure units from the secondary markets i.e., the stock markets. Where one wants to invest it direct with the MF, the sum thru ECS, can be as low as INR 500.00!
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