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A debt fund is a mutual fund which invests mostly in fixed income instruments like government securities, corporate bonds or treasury bills. These instruments give you a fixed rate of return at the end of a fixed period. In essence you are giving the bond issuer a loan, which it promises to repay with interest. Here are four significant benefits of investing in debt mutual funds.
It is important to remember however, that unlike bank deposits, debt MFs are not entirely free of risk. For instance, a change in interest rates could impact your investment. The corporate whose bond your fund may have invested in could collapse due to unforeseen reasons. Or they could be facing a liquidity crisis, which obviously puts your investment at risk. Over a longer term the returns on debt are likely to be far lower than the equity market, a debt fund therefore is good if you want to play safe and have a fixed financial objective and timeline in mind. Or if you have surplus funds in your savings account which could get more interest from debt.
Learn about DP ID in a demat account, how it differs from a Client ID, NSDL and CDSL formats, where to find it, and why it matters for investors.
Discover the right demat account for your investing needs by checking costs, platform quality, product access, safety features and support services.
Learn how to read a demat holding statement, check securities, DP ID, client ID, BO ID, valuation and download statements from NSDL, CDSL or CAS.