Debt funds; Investment safe heaven

There are so many types of mutual funds and there are some riskier mutual funds which fluctuate according to the share market up and down and accordingly they will provide returns against the same. There are also safer mutual funds which invest in government securities or in safe return heaven instruments and they don’t vary much according to market conditions. These types of funds are known as debt mutual funds.

Invest in Debt funds today, your money will be safe with better returns – Know details

Debt funds are also called liquid funds. Because there is no liquidity in it. This means that you can withdraw your money anytime.

Debt Mutual Funds

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Debt fund investment:

Debt fund is actually a mutual fund. In this, investors invest as an alternative to the bank’s Fixed Deposit or other Small Savings Scheme. Debt funds invest in following:-

(a)  Government securities,

(b)  Corporate bonds and

(c)  Treasury bills.

Debt funds give you decent returns at fixed rates once the fixed deposit tenure is over.

Your money will be safe

The objective of the debt fund is only to benefit the investors with safe investments. Let us tell you that debt funds are also called liquid funds. Because there is no liquidity in it. This means that you can withdraw your money anytime. Further your principal invested amount will always remain secured.

Benefits of Investing in Debt Funds

(i)            Stable funds

The returns in debt funds are generally always the same. Its rates never change due to the market. In such a situation, if you are scared to invest, then this is a safe option for you. On the other hand, if you want to do your financial planning for some time, then Debt Funds is the best.

(ii)          Lower fee

In Debt Funds, you can invest with less money than Equity and Mutual Funds. Often investors opt for debt and mutual fund schemes only, which does not affect the TDS. However, if you sell the fund units, you will have to pay a check at the time of investment.

Usually, investors’ money in such schemes is invested in government securities, bonds and corporate debentures. However, such funds provide lower returns than equity funds.

(iii)         Higher returns than FD:-

Actually these funds are less risky than equity funds. They have nothing to do with the ups and downs in the equity market. Let us tell you that in the long term, many debt funds have given 1.5 to 2 percent more returns than bank FDs. Most of the banks where FD is giving returns between 5.75 percent to 6.75 percent or 7 percent. So it is always advisable to invest in Debt funds instead of FDs. However you have to keep your investments in these mutual funds for at least 3-5 years.

(iv)         Low risk, best return

If you invest in a Debt Fund, you will get better returns. Because investing in mutual funds is considered to be the most profitable deal. It often happens that debt mutual funds offer higher returns than fixed deposits.

Money received from Debt funds comes under the purview of tax. Redemption of debt funds after 3 years attracts Long Term Capital Gains Tax (LTCG). Short term capital gains tax is required to be paid on the profit made after the sale of debt mutual fund units before the first 3 years.


“There is also disadvantage with debt mutual funds is that these funds can’t beat the inflation and returns generated by index funds and other mutual funds”

Debt funds generated income from following ways:-

  • Interest payment from bond holding generated coupons.
  • These are inversely proportion to interest rates so resulting in capital gain or loss accordingly.


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