How to invest in Debt Funds? Why Choose it?

Fixed Deposits have always been a part of everyone’s life at least once. In Indian households, you can find it for decades. In the present time, you won’t find FDs as now the market transition helps you invest in Debt Funds. So, let us discuss something worth investing your time in.

Let’s talk about it

From an Old Investment Technique to the Modern Era 

You might have heard about the time when every increment, bonus, etc., is invested in the FDs. You might have heard about the old investment techniques from your parents or grandparents. Earlier, FDs were considered to be the best investment option for ensuring capital protection.

What has changed now?

Mutual Funds came into the limelight, and of course, the modern investment technique took place. In addition, FDs have lost their sheen, and Mutual Funds took over the tag of most popular long-term investment. When demonetization took place in 2016, mutual funds could cash in on the opportunity that became available due to the reduced deposits return rates.

Also, due to the availability of the tax-saving mutual fund, it has risen to prominence. When a Debt Fund started giving more returns with liquidity, many investors decided to jump.

What are Debt Funds?

In simple terms, debt funds are the funds that invest the money of investors in fixed-interest generating securities, which include government and corporate bonds and other marketable securities. Debt Funds are considered safer. A Debt Fund comes with low risk. They come with varying maturity periods and generate income either periodically or on maturity period.

These are considered to be the best investment options at low risk. In addition, debt Funds are not volatile as compared to equity investment. Therefore, choosing debt funds is best suited for your investment, portfolio, requirements, and financial goals.

Why Invest in Debt MutuaFunds?

Debt Fund is the closest to conventional FDs; they are termed risky. A debt fund is a primary goal to give investors steady income throughout the investment horizon. You can find obvious debt funds and their duration directly from a third party. This will help investors understand fund performance concerning interest rates.

How does a debt fund work?

Debt Funds generate returns by putting money in bonds and fixed-income securities. Debt Fund purchases the securities and earns an interest income. The yields you and other investors receive from debt funds are based on the interest income.

Debt Fund invests in different types of bonds whose prices rise and fall depending on interest rates in the economy. If a debt mutual fund purchases a bond and its price rises due to a fall in the interest rates, it would make additional money.

When to invest in debt funds?

You must invest in debt funds based on the investment objectives and risk tolerance. Start investing in debt funds as early as possible and stay invested for the long term to earn the maximum return.

Debt Funds are a crucial segment and should be a part of their portfolio. First, however, one needs to understand how it works to delve into more details before choosing the debt fund.

Long Term Taxation Benefits by Debt Fund 

The time of duration for which investment is held impacts the taxation benefit for the investors. Debt Funds held for less than a year can incur short-term capital gain tax for the investor. On the other hand, debt Funds held for more than a year can return up to 20% of long-term capital gain, including the indexation benefits.

Diversifying the Risk Factor in Your Portfolio

Diversifying the risk factor is the crucial step in your portfolio for becoming a successful investor. A Venture Debt Fund invests your money in various startups and equity investors that meet the working capital requirement. Venture debt facilitates more growth and profitability as they are affordable as compared to equity.


Mutual Funds are subject to market risk, the most often line we hear. We all are aware of what the tagline exactly means. Isn’t it? Debt Funds are a relatively safest investment plan for you. Why? The debt funds have predictable returns, increased liquidity, and convenience making them one of the safest investments in the market. The only thing that one should remember is the best-performing funds.

Leave a Reply

Your email address will not be published. Required fields are marked *