What is a Debt Fund in Mutual Funds?
A debt fund is a mutual fund that invests in fixed-income securities like corporate bonds, government bonds, and money market instruments. Professionals manage these funds and are a good choice for investors who want stable and predictable income.
Debt funds are low-risk because they invest in securities that have fixed interest rates and maturity dates. This makes them less affected by market changes compared to other funds. They also offer high liquidity, meaning investors can easily buy and sell units.
Before to April 1, 2023, investments held for less than three years were subject to short-term tax, while those held for more than three years were taxed as Long-Term Capital Gains (LTCG). However, for debt funds purchased after April 1, 2023, the holding period is always considered short-term.
Returns from debt funds come from interest income and any increase in the value of the securities. These funds are ideal for people looking for regular income with low volatility and are also more tax-efficient than traditional savings options. Debt funds are like liquid fund, low duration fund, bond funds, income funds etc.
Always consult a professional mutual fund distributor before investing!
