A Complete Insight on The Debt Fund, Types, And Benefits.

A Complete Insight on The Debt Fund, Types, And Benefits.

An income debt fund is a kind of debt scheme where the interest rate generated is quite stable.

A Complete Insight on The Debt Fund, Types, Benefits, Who Can Invest In 

Whenever investors search for the best investing scheme, then and there a recommendation on investing in mutual funds pops up. Talking about mutual funds many are there but when you are looking to generate a definite interest from investing in securities then obviously debt funds out rule the rest.

In fact, you can see that securities issued by the government, bills of the treasury, commercial documents, or bonds from the corporate sector are the preferred ones. Investing in these will assure an escalation in your capital and a steady generation of money. So moving forward we will enlighten you on some of the important benefits related to debt funds, their type, etc.

What Are The Different Types of The Debt Funds?

Gilt Debt Fund 

The Gilt debt fund is a kind of fund that relies on the government fund. And the best part is that the risk factors associated with the same are very less. This is the reason why debt fund investors prefer this scheme much among the rest. 

Liquid Debt Fund

The main goal behind investing in this type of fund is that here you can get more liquid or cash when needed. Remember you can redeem the cash after 91 days and that is the ultimate period of maturity. Apart from that note that this particular kind of fund is mainly preferred by those who have enough funds to invest in. 

Ultra Short Term Fund 

This type of investment seems quite enticing for amateur investors. It is because being first-time investors they don’t have to think much about the risks in regard to the investment. Note that whenever you are investing the maturity year of this type of debt fund varies from 1 to 3 years at the max. 

Income Debt Fund

An income debt fund is a kind of debt scheme where the interest rate generated is quite stable. But yes it may offer you negative results especially when there is a drop in stock rate. 

Dynamic Debt Fund 

Dynamic debt fund as the name says is a type of fund where the portfolios are flipped as per the present market scenario and fluctuations. Therefore investing in this fund is a boon because anyhow it promises you escalated return. 

Credit Opportunities Debt Fund 

Credit opportunities debt fund is a type of fund where the finance manager takes the calculated chance to invest in less rated schemes with anticipation that in the future the price may accentuate. As a precautionary note, this debt fund is riskier in the whole lot.

Fixed Maturity Debt Plans 

These are quite similar to that of the fixed deposits offered by banks. But yes his is a one-time investment scheme. You have to invest the moment the offer is placed and you are not allowed to make investments in between. One more thing that makes you draw a line with the fixed deposit is that here the interest return may vary which means it can be less than expected as well. 

What Are The Privileges of Investing In Debt Funds?

In this part, we will purely discuss the benefits that you can get from the debt funds.

Check Out The Following To Have An Idea of That ;

Enjoy Flexibility 

Investors who have already invested in the debt fund have the privilege of switching the money to any other profitable scheme of their choice. Note that investors won't get such an opportunity in fixed deposit schemes because they cannot transfer according to their wishes. 

Return Is More 

Investors should know that investing in a fixed deposit or savings account cannot promise a high return but you can expect more return from a debt fund. 

Convenient Liquid Withdrawal 

Debt funds are the most preferred compared to the fixed deposit. It is because the fixed deposit has a specified withdrawal period. But debt funds don’t have such issues so you can withdraw the money at your convenience. 

Tax Privilege 

Investors should be familiar with the thought that debt fund is not affected by the long or short tax benefit. On top of that, the Debt fund does not come under the mandates of TDS on the other hand fixed deposit has deductions. 

Who Can Consider Investing In The Debt Fund?

Here we will list the pointers that will guide you through who are really appropriate for investing in the debt fund 

  • Firstly those who have enough funds and are willing to invest in this low-risk scheme. 
  • Debt funds are for those who approve of the idea of getting a definite return but at a smaller rate.
  • Those who want to gain more in terms of interest in comparison to their savings account in a bank. 
  • Individuals who want to have complete control, of their fund and can get cash anytime they want.
  • If you want to escalate your present earning then nothing could be better than the debt fund. 

Significant Things To Remember Prior To Investing In The Debt Fund
  • The Period of The Rate of Interest - While investing in the debt fund do make sure to invest during the period when the interest rate slips down.
  • Risk of Credit -Debt fund bears some risk related to credit therefore prior to making the investment you need to keep an eye on the portfolio. Note that debt funds that have fixed kinds of securities are considered best for investment as the credit risk factor is low.


Here in this article, we have included all the important information regarding debt funds. Note that debt funds are secure and leverage you to enjoy the cash. Unambiguously debt fund can emerge as the best form of investment tool but you need to be sure about your objectives and have complete knowledge regarding the risk related to the debt fund as well. 

Edited By Team CLIQTAX 

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