5 Types of Debt Mutual Funds In India

Debt Mutual Funds are mutual funds that invest in fixed income securities like bonds and treasury bills. These funds allow you to invest your income optimally at relatively low risk levels.

There are 5 Types of Debt Mutual Funds In India in which any individual investor can invest their money, let’s learn about these debt mutual funds.

5 Types of Debt Mutual Funds

1. Fixed Maturity Plans (FMP):

• Generate income by investing in a portfolio of fixed income securities
• Possibility of better yields with long term FMP’s in the 3-5 year horizon
• Short tenure FMP’s of 3-6 months, aim to take advantage of temporary spikes in interest rates
• Gain by investing for a fixed tenure during uncertain interest rate movements
• FMP’s offer reasonable returns, but no guarantees

2. Income Funds:

• Invest across debt instruments such as bonds, corporate debentures and government securities
• Invest in a range of maturity profiles right from a short-term tenure of 1-2 years to a long-term tenure of 15-20 years
• Recommend for investors with high-risk appetite
• Gain predominantly from falling interest rates

3. Liquid Funds:

• Invest in liquid and money market instruments such as treasury bills, inter-bank call money market, commercial papers, certificates of deposit etc.
• Efficient deployment of idle cash
• Invest with a time frame of a few days to a couple of months
• Stable returns amongst debt funds

4. Short-Term Funds:

• Invest in debt securities such as Commercial Papers (CP), Certificate of Deposits (CD) and bonds with a maturity of 1-3 years
• Efficient deployment of cash with reasonable returns
• Short-term funds are suited for an investment horizon of 6-12 months
• Limited effect from changes in interest rates
• Offer comparatively stable returns

5. GILT Funds:

• Invest in all types of government securities and bonds issued by the government
• Yields are associated with long-term investments having a time horizon of 18-24 months
• Carries Zero default risk
• Sensitive to interest rate fluctuations

Let your investments work in harmony for you; choose from variety of DEBT MUTUAL FUNDS for a stable portfolio.

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