Debt funds are a type of mutual fund that invests your money in safer options like bonds, government securities, or fixed deposits. These funds aim to give you steady returns with lower risk compared to equity funds.
How Do They Work
When you invest in a debt fund, your money is used to buy bonds or loans from companies or the government.
These bonds pay you interest over time.
Your money grows slowly but steadily as the interest is paid to you.
Why Choose Debt Funds
Safer Investment
Debt funds are less risky than equity funds because they invest in stable, low-risk options.
Steady Returns
You can expect regular interest payments and moderate returns.
Good for Short-Term Goals
Best if you need your money within a few years, like saving for a vacation or an emergency fund.
Types of Debt Funds
Short-Term Debt Funds
Invest in bonds with a short time frame. Low risk and stable returns.
Long-Term Debt Funds
Invest in bonds with a longer time frame. Slightly higher risk but better returns.
Government Bond Funds
Invest only in government bonds, which are very safe. Ideal for conservative investors.
Corporate Bond Funds
Invest in bonds issued by companies. Higher risk, but can give higher returns than government bonds.
Who Should Invest in Debt Funds
People who want low risk and steady returns.
Those looking to save for short-term goals or build an emergency fund.