Debt Funds: Better Than FDs, Safer Than Stocks

Debt mutual funds invest in fixed-income instruments such as government bonds, corporate bonds, and money market securities. They focus on providing stable and relatively safer returns compared to equities. These funds are generally preferred by investors seeking lower risk and regular income.

Key Benefits

Types of Debt Funds

By Short Investment duration

Overnight Fund

Instruments with 1 - day maturity

Liquid Fund

Instruments for high liquidity

Ultra Short Duration Fund

Invests in debt with 3 – 6 month maturity

Low Duration Funds

Invests in bonds with 6 – 12 month maturity

Money Market Funds

Invests in highly liquid, short - term debt

Short Duration

Invests in bonds with 1 – 3 year maturity

By Medium to Long duration

Medium Duration

Bonds with 3 – 4 year maturity

Medium to Long Duration

Bonds with 4 – 7 year maturity

Long Duration

Bonds with over 7 - year maturity

Dynamic Bond

Shifts maturities based on interest rate outlook

Fixed Maturity Plans

Closed - ended funds that mature on a fixed date

ETFs

Funds that track index, commodity, or theme

By Others

Banking and PSU Fund

Debt issued by banks and PSU companies

Corporate Bond

Invests in corporate debt securities

Credit Risk Fund

B onds with higher return potential

Gilt Fund

Invests in government securities

Floating Rate

Bonds that adjust with the market

Debt -Interval Funds

Allows investme nt during fixed intervals

Top Performing Debt Funds

Discover equity funds that have consistently delivered strong returns and outperformed market benchmarks over multiple years.

Fund Size (In Cr.)
1,426
3Y Return
7.03%
Fund Size (In Cr.)
37,122
3Y Return
7.01%
Fund Size (In Cr.)
10,218
3Y Return
6.92%
Fund Size (In Cr.)
155
3Y Return
6.89%

FAQ’s

Frequently Asked Questions about Equity Funds

Who should invest in debt funds?

They are suitable for conservative investors or those looking for short- to medium-term investment options with relatively lower risk than equity funds.

No, but they are generally less risky than equity funds. Risks include interest rate changes, credit risk (default by issuers), and liquidity risk.

After the latest tax changes, all gains from debt funds are added to your income and taxed as per your slab rate, regardless of the holding period.

There’s no mandatory lock-in. You can invest for a few months to a few years, depending on the type of debt fund you choose

Yes, SIPs are possible in debt funds too, though many investors prefer lumpsum since they are often used for short-term goals.

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