When should you invest in debt funds?

Is it the right time to invest in debt funds?

You don’t really need to time your investment in debt mutual funds. When investing in a debt mutual fund, you can even invest lump sum. Make sure that you choose the appropriate kind of fund depending on your time frame. Many investors invest in debt funds for the long term.

When should you invest in debt securities?

If you are looking to earn a regular income from your investments, then Monthly Income Plans may be a good option. Investing in debt funds is ideal for risk-averse investors as they invest in securities that offer interest at a predefined rate and return the principal invested in full upon maturity.

Why should I invest in debt funds?

Debt funds come with no such lock-in and hence, offer high liquidity. Debt funds are suitable to invest your surplus money and earn some interest on it. Debt funds usually offer higher interest rates than bank deposits and hence, they can be of great help to fulfill short-term goals.

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When should you invest in debt or equity?

● Debt vs Equity fund

Both equity and debt funds tend to behave differently when it comes to investment and return. Where equity funds depend on the growth of the company, debt funds depend on the credit rating. However, if you really wish to play safe, you should invest in debt funds.

Why debt funds are falling?

Debt mutual funds have been under pressure for the last couple of months. The rise in bond yields, uncertainty on the rate front and growing inflation have all contributed to the lower returns from debt funds.

Are debt funds risk free?

Debt funds grow investors’ wealth with little to no risk. Additionally, these funds strive to provide regular income. Investors usually stay invested in debt funds for a short to medium-term horizon. You need to choose an appropriate debt fund as per your investment horizon.

Do debt funds give monthly income?

This monthly income plan falls under the category of the debt-oriented fund in which the money is majorly invested in debt instruments such as government securities, corporate bonds, etc.

How many debt funds should I have?

So how many funds should one have in one’s portfolio:

And ideal count in any portfolio is about 8 schemes, where you have different kinds of equity and debt funds. Also, ensure there is real diversification in your schemes and not just the same mandate with different fund names, Shweta said.

Which type of debt fund is best?

Best Performing Debt Mutual Funds

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Scheme Name Expense Ratio 1Y Return
UTI Medium Term Fund 1.02% 6.77% p.a.
UTI Ultra Short Term Fund 0.37% 6.73% p.a.
Kotak Medium Term Fund 0.46% 6.15% p.a.
Axis Strategic Bond Fund 0.39% 5.28% p.a.

Which debt fund is best for short term?

Top Short-Term Debt Funds Based on Returns

Short-term Debt Funds Returns over the past two years Returns over the past three years
ICICI Prudential Short Term Fund 9.74% 9.56%
UTI Banking and PSU Debt Fund 9.74% 9.36%
Franklin India Low Duration Fund 9.66% 9.73%
HDFC Regular Savings Fund 9.45% 9.72%

What is the return on debt fund?

List of Debt Mutual Funds in India

Fund Name Category 1Y Returns
HDFC Credit Risk Debt Fund Debt 6.5%
SBI Magnum Income Fund Debt 3.5%
ICICI Prudential All Seasons Bond Fund Debt 4.5%
SBI Magnum Medium Duration Fund Debt 4.4%

How does debt funds work?

How do debt funds work? Debt funds aim to generate returns for investors by investing their money in avenues like bonds and other fixed-income securities. This means that these funds buy the bonds and earn interest income on the money. The yields that mutual fund investors receive is based on this.

What is more risky debt or equity?

The main distinguishing factor between equity vs debt funds is risk e.g. equity has a higher risk profile compared to debt. Investors should understand that risk and return are directly related, in other words, you have to take more risk to get higher returns.

Which is better debt fund or equity fund?

Therefore, equity funds are a volatile asset class when compared to debt and are suitable for investors with high-risk appetites. They are ideal for capital appreciation in the long term. Debt funds primarily invest in debt and money market instruments with the objective of generating income through interest payments.

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Why equity investment is better than debt?

Principal among them is that equity financing carries no repayment obligation and provides extra working capital that can be used to grow a business. Debt financing on the other hand does not require giving up a portion of ownership. Companies usually have a choice as to whether to seek debt or equity financing.