Why should we invest in Debt Funds?

by Jayant Harde Our associates have a rich corporate experience of

For our body’s overall growth and health, we need to eat a balanced diet. To keep yourself healthy and fit, our body needs different nutrients and one type of food can not provide all the nutrients it needs. Therefore, to sustain our body we have to eat different kinds of food in the right proportion. Each nutrient has a unique role to play in our body’s well-being (e.g. carbohydrates give us instant energy while proteins help in tissue growth and repair).

Similarly, to ensure our financial wel-lbeing we need a balanced investment portfolio in life. We need a mix of different kinds of assets within the portfolio that play different roles, like the different nutrients in our diet. For financial security and prosperity, one should invest in various types of assets such as equities, fixed income, gold, and real estate. Individual investors can find it hard to directly invest in certain asset classes such as fixed income, which includes bonds and money market instruments. Alternatively, they can invest in debt funds that invest in securities like this. These have lower but relatively stable returns while balancing your equity, cash, and real estate investment portfolio.

What is a Debt Fund?

Buying a debt instrument is similar to giving the issuing entity a loan. A debt fund invests in fixed-interest creating securities such as corporate bonds, government securities, treasury bills, commercial paper and other instruments on the money market. The basic reason why you invest in debt funds is to gain interest income and capital appreciation.

How do Debt Funds work?

Debt funds invest, depending on their credit ratings, in different securities. A credit rating for security means if the issuer fails to disburse the returns they promised. A debt fund manager guarantees he’s investing in high-quality credit instruments. A higher credit rating means that the company is more likely to consistently pay interest on the loan protection as well as to pay back the principal amount upon maturity. Debt mutual funds investing in higher-rated securities are less volatile than low-rated securities. In addition, maturity also depends on the fund manager’s investment strategy and the overall economic interest rate regime.

A declining interest rate environment enables managers to invest in securities of a long duration. Conversely, he is encouraged by an upward interest rate regime to invest in short-term securities.

Why should we invest in debt funds?

More liquid:

A debt fund is very liquid. You can withdraw the investment whenever you want and the next day there will be money in your account.


We are more effective in tax matters. The investment is viewed as the long-term capital gains after one year of an investment debt. The longer you keep the debt fund the bigger the tax advantages.

You don’t lose:

When you invest in the open-ended debt fund, you don’t lose even a day of growth. In the end you’ll be getting a lum sum amount.

Higher return:

The debt fund’s pretax return is comparable with those from the other debt option, such as bonds. Short term debt funds are not overly affected by the rate.


They offer great flexibility in investing small amounts every month through SIP, or whenever you have cash surpluses.

Best Debt Funds

Here are some of the best debt funds to invest in.

  • DSP Government Securities Fund – Regular Plan-Growth
  • Edelweiss Government Securities Fund Regular Growth
  • Reliance Income Fund-Growth Plan
  • L&T Triple Ace Bond Fund Growth
  • Aditya Birla Sun Life Floating Rate Fund Regular Plan-Growth

To know more about Debt Funds, you can visit our website or contact our representative at +91 712 2282029 or meet us at 51, Gurukripa, Old Sneha Nagar, Wardha Road, Nagpur – 440015.


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About Jayant Harde Innovator   Our associates have a rich corporate experience of

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Joined APSense since, June 21st, 2019, From Nagpur, India.

Created on Feb 11th 2020 06:09. Viewed 330 times.


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