Different types of debt funds

In the world of financial activities, investing in proper mutual fund schemes have become a vital part of your goals. Now we have various types of schemes for different investors. All of them depend on the investors' risk appetite, their financial goals being long or short term, and of course, capital available to get in the mutual fund investment schemes. Of all, two types of funds have caught the attention of both seasoned and young investors in the market, the debt fund and equity mutual fund.

Let us today, learn a bit about what is debt mutual fund, its difference from the equity fund scheme and various schemes available under it.

Now, what is a debt mutual fund? It's a certain scheme that allows you a fixed income per your investment tenure. The debt fund aims to provide a safe investment space for those who desire a stable source of income from investment returns and lesser risks involved with the market. Meaning, you can invest in securities, government bonds, Non-convertible debentures, etc. without the fear of losses from the market.

Not to forget, these units of securities have lesser risks hence there won't be any adverse effects on your regular income goal from debt funds.

Additionally, debt mutual funds have differences from equity funds. When it comes to safety and returns, debt funds take slow & steady steps, while equity funds, mostly investing in company stocks and shares, love the idea of risks, avid researching, and highly profitable returns.

To understand these further, let's look into the difference between debt and equity mutual funds:

• Risk Debt funds have little to no risk factors involved with their units. The government bonds, securities, and corporate units do not face the market risks and hence, safer options for a newcomer investment enthusiast. Equity funds, on the other hand, are open to the risks from currency value fluctuation, change in tax rates and various economic factors. Hence one has to have a high appetite in risk management to combat the volatile nature of equity funds.

• Nature Debt funds pool in money from enthusiastic investors and put them in government and corporate-oriented bonds & securities, fetching profitable fixed income for the investors under low amounts of risk factors. And unlike debt funds, equity funds invest the money into company shares and stocks after intensive portfolio research to find units that are best suitable for the investor's financial goals.

Now, let's check out the different types of debt funds from which an investor can opt from and begin their investment journey.

• Liquid Funds Liquid funds are best suited for investors who wish for surplus returns from their investment. The maturity of these fund values come in 91 days with high liquidity benefits in cash or cash value.

• Short-Term Debt Funds

  For those who wish for a short term investment opportunity (min. 1-year maturity) with stable fund status through bonds and debentures, this scheme works wonders. Not to mention, this fund has quite a low amount of risk-rate from the market.

• Gilt Funds

  Gilt funds are highly rated, investing in government securities under low risk-level, hence a safe option for investment.

These are the types of debt funds that you can invest in based on your personal investment goals. For those who wish for a steady and smooth mutual fund investment period, debt mutual fund is the key.

In the world of financial activities, investing in proper mutual fund schemes have become a vital part of your goals. There are two types of funds have caught the attention of both seasoned and young investors in the market, the debt fund and equity mutual fund.

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