Though less volatile, debt mutual funds are not entirely risk-free unlike bank deposits as any change in interest rates could negatively impact on your investment.
Investors looking for safe long term investments can opt for Debt Funds as they are less volatile as compared to others.
Debt Mutual Funds have been gaining prominence around the investment sphere as these schemes are better off in tackling market volatility. Owing to its safety features, they have become the foremost choice of traditional investors who don't want to step around the risky zone which equity mutual funds carry. However, the start of this year was volatile for bond markets across the globe, including India. At this point of time, mutual fund advisors are advocating people to invest for long term debt funds, which can give better than FD returns. Looking at the investment patterns of Indian investors who look out for good returns from their investments, liquidity in case of emergencies and a defined period to hold their investments, debt funds are a good choice to have in their portfolio. Experts strongly advise to stay invested for long term and ignore short term volatility.
Though less volatile, debt mutual funds are not entirely risk-free unlike bank deposits as any change in interest rates could negatively impact on your investment. Secondly, the bonds in which your fund might have invested in could collapse due to unforeseen circumstances, putting great risk on your investment. Still, as compared to equity investments these carry lesser risk and investors wanting to play safe with a fixed financial objective and maturity period in mind can opt for these. Those having surplus funds in their savings account could gain a bit more by shifting their funds in debt mutual funds. Debt Mutual Funds in India invest majorly in fixed income instruments like government securities, corporate bonds or treasury bills. These instruments yield a fixed rate of return at the end of the maturity period.
With the lower levels of risks that they carry, there are also significant benefits of investing in debt mutual funds specified below:
Stability in Returns
Debt funds don't depend on market sentiments and are more likely to give a stable rate of return. It is one of the safest options in Mutual Funds for those with lower appetite for risk.
Unaffected by Volatility
Debt funds offer a shield against market volatility of the equity market. The diversification of funds helps stabilization of your returns.
Liquidity
Debt funds can be liquidated without much hassles as compared to other investment instruments like traditional fixed deposits which come with mandatory lock-in periods and attract penalty in case of premature withdrawal.
Low Fees
The transaction fees levied on debt funds are comparatively lower than other mutual funds.
Conclusion
Debt Mutual Funds are one of the best fixed short term to medium term investment goals and carry lesser risk. So, every mutual fund investor should consider allocating some percentage of their portfolio to Debt Funds.
Disclaimer: This is a featured content
Read Exclusive COVID-19 Coronavirus News updates, at MyNation.