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Everything you need to know regarding debt mutual funds
Introduction A debt fund is a specific class of mutual fund that invests in debt securities, such as corporate debt securities, corporate and government bonds, money market instruments, etc. Debt mutual funds come in a variety of forms to accommodate investors with various risk-return profiles, time horizons, and financial objectives. Treasury bills, government securities, commercial paper, certificates of deposit, money market instruments, securitized debt, and corporate bonds are just a few of the several types of debt that debt funds invest in. It is also referred to as bond funds or fixed-income funds. The primary difference between debt funds and equity funds is their investment in various asset types. Debt funds primarily hold bonds and cash assets, whereas equity funds allocate at least 65% of their assets to equities and equity-linked products. Remember that the values of the securities that comprise an investment determine its worth. Debt funds investment values are more steady than equity fund values due bond prices are often less erratic than stock prices. Therefore, money invested in debt is seen as less dangerous, especially when kept for brief periods of time. Why should you invest in debt funds? Debt funds have significant advantages for those investors who have always kept their money in bank accounts.
The Accrual Strategy of Debt Funds invests in bonds and holds them till maturity to produce consistent returns for the investor. This approach is centred on earning interest from the Bonds it buys. These Debt Funds have a relatively minimal interest rate risk since they retain investments until they mature. Liquid Funds, ultra-short duration funds, Low Duration Funds, and Money Market Funds are the main beneficiaries of this tactic. If you are looking to make debt fund investments that use this method, you should do so if you want steady returns with little risk. Wrapping Up Debt mutual funds provide investors with a range of benefits and opportunities. Investing in debt securities, like money market instruments and money, offers access to market returns and expertise. These funds also help reduce portfolio risk compared to equity funds. Investors can choose funds based on their preferred duration and credit risk, with various options for investing. Overall, debt funds offer a stable and potentially rewarding investment avenue for those seeking steady returns with lower risk.
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