Aug 7, 2024
Different Types of Debt Funds
Debt funds in mutual funds invest in fixed-income securities like treasury bills, corporate bonds, commercial papers, government securities, and many other money market instruments. The NAV or Net Asset Value of Debt Mutual Funds is inversely related to interest rate movement. Generally, when e https://urzadzajzpasja.pl/ https://dlabiznesmena.pl/ https://przewodnikmodowy.pl/ https://remontibudowa.com/ https://zaskakujacakuchnia.pl/ https://polskiewyprawy.pl/ the interest rates rise, the prices of existing fixed income securities in your debt mutual fund portfolio fall and when interest rates drop, such prices increase.
Types of Debt Funds in India
- Dynamic Bond Funds
Dynamic Bond Fund is a type of debt fund where the fund manager adjusts the portfolio as per the fluctuating interest rates. Dynamic bond funds have different average maturity periods as these funds take investment decisions based on interest rates and invest in instruments of longer and as well as shorter maturities.
- Short Duration Debt Funds
These type of debt funds make investments in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 years.. Conservative investors prefer these funds, as they are generally not influenced much by interest rate movements.
- Liquid Funds
Liquid funds is a type of debt fund consisting of underlying debt instruments with a maturity of not more than 91 days. This makes them relatively less risky. Liquid funds can be an option to park investor’s surplus fund and can act as emergency funds.
- Gilt Funds
These type of Debt funds make minimum investment in Gsecs- 80% of total assets (across maturity) and considered to have low credit risk. . The government rarely defaults on the loan taken in the form of debt instruments; gilt funds are perfect for risk-averse fixed-income investors.
- Fixed Maturity Plans