A mutual fund that invests in fixed income instruments such as government bonds and corporate bonds, debt securities, and money markets that can offer capital appreciation is known as a debt fund. They are also known as fixed-income funds or bond funds.
The major advantages of debt funds are mentioned below. They are as follows:
- Safe as compared to the other funds
- Stable returns
- High liquidity rates
- Low-cost structure
The parameters to choose the debt mutual funds are mentioned below. They are as follows:
- The maturity of the fund:
If you are planning to invest in debt mutual funds, then you must properly research the maturity of the fund before investing. Your investment horizon should match the maturity for proper returns. The fund that matures according to your plan can be the best option, but before investing in any type of fund, you should properly research it.
- Fluctuation in the interest rates
The investment market is highly competitive, and the rates fluctuate almost now and then. Debt funds are popular in the market, so they are influenced by market fluctuations. If in case your fund is affected by the market fluctuations, do not panic and ask for professional opinions. They can help you create a safe environment where your investment goals are maintained.
- Performance of the Fund
Before investing in any type of mutual fund, you should properly enquire about its performance in the past. It can give you an idea about the returns and other related things. The present performance of the fund is an important aspect, but their historical trends will also help the investors to get clear about the debt mutual funds.
- Fund rating
The rating of the debt mutual funds is an important aspect. It can help you in making your final decision for the fund. The rating of the fund decides the quality of the fund and is also based on its performance. The funds with AAA ratings are considered best for the investments.
- Expense ratio
The expense ratio is defined as an amount that is used for managing the fund. If the expense ratio is low, then the returns will be high on the fund. So before investing in any debt mutual fund you should enquire about the important aspects such as expense ratio. It will help you in calculating the returns on the mutual funds properly.
Debt mutual funds are one of the best investment options if you are planning your long time financial goals. The market is highly competitive, so the investor should complete their research before investing. It will help them in making the appropriate investments. The ideal person for debt mutual funds is an investor interested in regular income. Investors should check the returns before investing so that if they have a goal of a regular income, it can be fulfilled easily.