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Debt Funds

Debt fundsrefer to aninvestment poolsuch as mutual funds andETFs with fixed income investments forming their core holding. Debt fundsgenerallyinvest in short-term or long-term assets such as money market instruments, securitized debt instruments, bonds, and floating rate debt. The major goals of any debt fund include protecting investors’ capital,preserving investors’ capital, and generation of regular fixed income through your invested corpus.

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 are not affected as much by market volatility. In fact, debt funds makeyour 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 invested securities will appreciate due to changing market dynamics.

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 ratingsuch as AAA andA+ assigned by top independent ratings agencies such as Crisil, Fitch, ICRA, and Care.This will help you largely in assessingthe repayment or redemption capability of the issuer of debt securitiesat the maturity date. Ratings provide debt funds with a potent tool to analyse payment potential of the issuers of various fixed income securities. Debt funds have different baskets of fixed income instruments, which they would customize based on your financial objectives,time horizon, and risk propensity.

Following are the most common types of debt funds available to investors:

  • Liquid funds
  • Money market funds
  • Ultra short-term funds
  • Floating rate funds
  • Short and medium-term income funds
  • Fixed income funds
  • Gilt funds
  • Close-ended debt funds
  • Hybrid funds

To know more about investing in debt funds or other Alternative Investment Funds (AIFs), call us on 022-28583333or write to us at: www.altsmart.in

Nucleus House, Saki Vihar Road, Andheri (E), Mumbai - 400 072.


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