Nifty 17196.7 (-1.18%)
Sensex 57696.46 (-1.31%)
Nifty Bank 36197.15 (-0.85%)
Nifty IT 35848.05 (-0.86%)
Nifty Financial Services 17779.5 (-1.13%)
Adani Ports 737.45 (-0.22%)
Asian Paints 3110.45 (-2.21%)
Axis Bank 673.00 (-0.46%)
B P C L 385.90 (1.86%)
Bajaj Auto 3287.85 (-1.22%)
Bajaj Finance 7069.25 (-1.55%)
Bajaj Finserv 17488.70 (-1.52%)
Bharti Airtel 718.35 (-1.94%)
Britannia Inds. 3553.75 (-0.69%)
Cipla 912.05 (-1.00%)
Coal India 159.75 (0.28%)
Divis Lab. 4757.05 (-0.42%)
Dr Reddys Labs 4596.50 (-1.42%)
Eicher Motors 2455.55 (0.16%)
Grasim Inds 1703.90 (-1.16%)
H D F C 2771.65 (-1.29%)
HCL Technologies 1171.40 (-1.12%)
HDFC Bank 1513.55 (-0.80%)
HDFC Life Insur. 690.95 (-2.03%)
Hero Motocorp 2462.45 (-0.41%)
Hind. Unilever 2343.65 (-1.66%)
Hindalco Inds. 424.65 (-1.72%)
I O C L 122.20 (1.28%)
ICICI Bank 716.30 (-0.84%)
IndusInd Bank 951.15 (0.59%)
Infosys 1735.55 (-0.73%)
ITC 221.65 (-1.69%)
JSW Steel 644.55 (-0.34%)
Kotak Mah. Bank 1914.20 (-2.55%)
Larsen & Toubro 1801.25 (0.67%)
M & M 836.95 (-1.48%)
Maruti Suzuki 7208.70 (-1.59%)
Nestle India 19321.35 (-0.93%)
NTPC 127.00 (-1.32%)
O N G C 145.90 (1.32%)
Power Grid Corpn 206.10 (-3.92%)
Reliance Industr 2408.25 (-3.00%)
SBI Life Insuran 1165.95 (-1.86%)
Shree Cement 25914.05 (-1.43%)
St Bk of India 473.15 (-0.81%)
Sun Pharma.Inds. 751.80 (-1.89%)
Tata Consumer 774.30 (0.14%)
Tata Motors 480.10 (0.21%)
Tata Steel 1118.00 (0.50%)
TCS 3640.45 (-0.07%)
Tech Mahindra 1593.30 (-2.23%)
Titan Company 2369.25 (-0.72%)
UltraTech Cem. 7332.45 (0.13%)
UPL 712.75 (2.08%)
Wipro 640.75 (-0.94%)

5 Mantras for Debt Mutual Funds

5 Mantras for Debt Mutual Funds

5 Mantras for Debt Mutual Funds

 

 Fixed Income Securities: Debt mutual funds, managed by professional managers, invest in a range of fixed-income or interest-bearing securities. When you invest in a debt mutual fund, you are essentially lending to the issuer via the mutual fund. In exchange, the issuer pays the mutual fund some interest which leads to an appreciation in the value of your investment. While debt funds are stable and low-risk instruments, it is important to note that they are not risk-free.

 Credit Rating is important: Institutions such as CRISIL and ICRA rate debt instruments based on their ability to pay their financial obligation. Higher credit rated instruments are safer and thus, offer a lower rate of return. Similarly, lower credit rated instruments are riskier but offer a higher rate of return to compensate for higher risk.

 Types of Debt Funds: There are several types of debt funds, which could be segregated as per the type of borrower (company or government), maturity of the securities in the fund (overnight, 91-day, short-term, medium-term, etc), duration of the fixed-income securities, and as per credit rating (AAA, AA, etc.).

 Benefits: Debt funds are highly liquid and relatively safer than equities. Historically, they have also provided better returns than FDs. They complement equities and can help you build a balanced portfolio where the equity component can help you grow your money while the debt component can help you protect your money.

 Risks: Just as there is ‘no free lunch’ there is no ‘risk-free’ investment. Debt mutual funds have two primary risks. First is interest rate risk, i.e., the impact of changing interest rates on the value of the fixed-income security and the second is credit risk, i.e., risk that the issuer will default on paying the interest rate and/or principal.

Open Demat Account

Enter First Name & Last Name
Enter Mobile Number
Enter correct otp
Please enter referal code
Start investing in just 5 mins
Free Demat account, No conditions apply
  • 0%* Brokerage
  • Flat ₹20 per order
Next Article