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Top 5 Debt Mutual Fund Instruments

A debt fund is a Mutual Fund scheme that invests in fixed income instruments, such as Corporate and Government Bonds. They are ideal for investors who want regular income, but are risk-averse. Debt funds are less volatile and, hence, are less risky than equity funds. Debt Funds can be considered for an investment horizon of 1 day to up to 3 years. They offer better post-tax returns compared to FDs if you stay invested for at least 3 years

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Top 5 Debt Mutual Fund Instruments

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  1. Top 5 Debt Mutual Fund Instruments There are different debt funds that invest in debt securities with specific Durations, for specific goals or for a specific risk profile. Let’s take a look at the different options available to investors. Overnight Fund Overnight funds are relatively stable investments since they have such a short maturity period and hence minimal credit and interest rate risk. These funds are also the safest and most liquid, with no exit load. When choosing an overnight fund, be sure to compare it against returns from a savings account to get the best idea of its performance. Liquid Fund Liquid funds are a type of mutual fund that invest in debt and money market securities, such as Treasury bills, certificates of deposit, and commercial paper with maturities of up to 91 days. Some liquid funds also offer an instant redemption facility, which allows investors to redeem up to ₹50,000 per day per scheme. Liquid funds are highly liquid and have no exit load. They should be compared to savings bank returns. Banking & PSU Fund Banking & PSU Fund is a great investment for those looking to invest in debt instruments of banks, PSUs, and public financial institutions. With an 80% asset allocation to these types of investments, the risk profile

  2. is similar to that of corporate bond funds but with better credit rating. Floater Fund A Floater Fund is a mutual fund that invests the majority of its assets in debt instruments with floating interest rates. The interest rate of these instruments changes according to market conditions, and the time horizon for investment is similar to that of short/medium duration investments. Gilt Funds Gilt funds are a type of investment that invest at least 80% of its assets into government securities that have varying maturities. They are considered to be relatively stable compared to other investments because they have exposure to sovereign papers. This means that there is very little credit risk involved. Gilt funds are a good choice for risk-averse investors because of the high interest rate risk and zero credit risk. That’s it. These are the 13 major categories of debt instruments. In case you want to learn how to analyze a debt mutual fund, head over to the debt mutual fund analysis blog and learn the top 5 metric to analyze a debt mutual fund.

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