While Equity Mutual Funds invest in stocks and other equity related securities, Debt Mutual Funds offer a wide range of solutions that invest in interest bearing securities like Government & Corporate Bonds, Term Deposits and Money Market Instruments. Debt Funds are also referred to as Fixed Income Funds, are generally low risk products and typically aim to provide regular income.
The different types of Debt funds are as follows:
- Liquid funds: When you have surplus cash and your investment horizon is up to a month, consider investing in Liquid Funds that invest in highly liquid money market securities and other short term debt instruments.
- Short to Medium Term Debt Funds: They aim to add stability to your equity portfolio by investing in interest bearing securities like corporate bonds and term deposits and are ideal for investment horizon between 3 months to 2 years.
- Income Funds and other dynamically managed Debt Funds: They aim to take advantage for changing market interest rates and invest in a wide variety of fixed income securities like bonds, debentures (both government and corporate), treasury bills and commercial papers.
- Gilt Funds: These funds allow you to invest in securities such as Government Bonds that may not be available to individual investors.
- Fixed Maturity Plans and other Close ended Debt Funds: These funds generally have a specified date of maturity and can serve as alternatives to traditional savings instruments.