Types of Debt Mutual Funds – Park Your Funds Like a Pro
Types of Debt Mutual Funds - Park Your Funds Like a Pro
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Their is nothing better for an Indian parent than hearing the sound of the purely magical word ‘Fixed’ when it comes to the return on the money invested. And this very magical word limits the scope of growth in a very excruciating way.
The Fixed rate of return options like government securities, corporate bonds, treasury bills or the infamous fixed deposits do give us a hint of satisfaction that comforts us in our subconscious but they also hinder in the most important objective of any investor which is nonetheless wealth creation.
So in order to know all about escaping this trap, read the below article to get all the options from a day to years for smartly handling and distributing funds in safe yet progressive options.
Types of Debt Mutual Funds
1. Liquid Funds
- Maturity in 91 days.
- Better rate of return than saving account.
- Almost risk free.
- Very less chances of giving negative returns.
- Some offer instant redemption option.
2. Gilt Funds
- Very less risk.
- 80% of the funds are invested in government securities.
- Perfect for conservative investors.
3. Overnight Funds
- Maturity period is 1 day.
- Invests in overnight securities and the investment is done generally to put the emergency funds or funds medical expense money to use.
4. Corporate Bond Funds
- 80% of assets are put in highest rated bonds like A++ or higher.
- Existence of credit risk.
- Regular income.
5. Dynamic Bond Funds
- Invests in bonds with different maturities in order to diversify the risk.
- Good for moderate risk takers.
- Investment time period is from 3 to 5 years.
6. Floating Rate Funds
- 65% investment is done in floating rate debt instruments.
- Low interest rate risk.
7. Fixed Maturity Plans
- Close ended fund.
- Fixed tenure.
- Option of consistent returns.
Except all the above alternatives the market also has others like low duration fund, short duration fund, ultra short duration funds, money market fund, banking and public sector debt funds.
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Gourav Ahuja
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