5 Basic Things To Know About Debt Funds

5 Basic Things To Know About Debt Funds BY INVESTMENTZ

 Debt funds refer to an investment pool such as mutual funds and ETFs with fixed income investments forming their core holding. Following are 5 basic things to know about debt funds:  Debt funds generally invest in short-term or long-term assets  Debt funds protect and preserve investors’ capital  Debt funds give prominence to absolute returns over various performance benchmarks  Money invested in debt funds is not affected as much by market volatility  Debt funds invest in debt securities only

Invest in short-term or long-term assets Debt funds generally invest in short-term or long- term assets such as money market instruments, securitized debt instruments, bonds, and floating rate debt.

Debt funds protect and preserve investors’ capital The major goals of any debt fund include protecting investors’ capital, preserving investors’ capital, and generation of regular fixed income through your invested corpus.

Prominence to absolute returns over various performance benchmarks The major characteristic that makes debt funds stand out for cautious and moderate investors is that they give prominence to absolute returns over various performance benchmarks. Thus, debt funds become a safer investment option.

Money invested in debt funds is not affected as much by market volatility  In fact, debt funds make your overall investment portfolio stable while providing you with the freedom to withdraw your money when you require it the most. Debt funds invest your money in different securities based on a well-planned investment strategy. When you invest your money in debt funds, it will earn you interest. Moreover, the value of the investment securities will appreciate due to changing market dynamics.

Invest in debt securities only The factor that sets debt funds apart from other investment instruments is that they invest in debt securities only. Therefore, as an investor, you will know the credit rating such as AAA and A+ assigned by top independent rating agencies such as Crisil, Fitch, ICRA, and Care.

 This will help you largely in assessing the repayment or redemption capability of the issuer of debt securities at the maturity date. Ratings provide debt funds with a potent tool to analyze payment potential of the issuers of various fixed income securities. Debt funds have different baskets of fixed income

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