Types of Debt Mutual Funds to Invest In
by Anand Srinivasan Mutual Funds ExpertDebt Mutual Funds are a good investment option to earn
reasonable returns while taking care of your risk appetite. Many people
consider Debt Funds as a limited investment option. However, that is so not
true. You can invest in several debt funds based on your investment goal and
horizon. Here we list the types of Debt Funds classified by the Securities and Exchange Board of
India.
·
Overnight
Funds: If you want to
invest in Debt instruments for a short period, consider Overnight Fund. The fund matures within a day, and they carry zero interest
rates and credit risk.
·
Liquid
Funds: If you wish to
meet a short-term financial goal, investing in these is ideal for you. Here,
you invest in assets like Government Bonds, Treasury Bills, and certificates.
You can hold the fund for a period of 91 days.
·
Low-Duration
Funds: Here, you invest
in Debt instruments with a shorter investment tenure. These instruments
generally have a duration ranging anywhere from six to 12 months.
·
Ultra-Short
Duration Funds: Like low
duration, these funds have a shorter investment term. You can redeem these investments
in a period of three to six months.
·
Money
Market: If you have a fair
investment horizon, you can invest in a Money Market Mutual Fund. These
investment instruments have a maturity up to one year.
·
Short
Duration Funds: Do you want
to buy an expensive home appliance or save money for a Car Loan down payment?
Then you should consider investing in them. Your fund manager invests in Money
Market instruments for one to three years.
·
Medium
Duration Funds: They are
those funds that have an average investment tenure. You can hold such Mutual
Fund Investment for three to
four years.
·
Medium
and Long Duration Funds: These
are a combination of both Medium and Long Duration Funds. You can invest in
them for a period of four to seven years.
·
Long
Duration Funds: Money Market
instruments maturing here for seven years or more.
·
Dynamic
Funds: You could also
invest in Dynamic funds as they invest across duration.
·
Corporate
Bonds: Here, at least
80% are invested in Corporate Bonds of the highest rating.
·
Credit
Risk Fund: With a Credit
Risk Fund, you allocate 65% to Corporate Bonds with a lower rating.
·
Banking
and PSU Funds: Here, 80% of
your investment focuses on banks and public financial institution holdings.
·
Gilt
Funds: With this fund,
you invest 80% in G-sec across maturity.
·
Gilt
funds with 10 years duration:
They work like a Gilt Fund. The only difference is this one has a maturity of 10
years.
·
Floater
Funds: Here, you invest a
minimum of 65% in floating rate instruments.
Sponsor Ads
Created on Aug 31st 2022 15:01. Viewed 237 times.