Debt Funds are mutual funds which invest your money in fixed interest earning instruments. The main objective is to accumulate wealth by means of interest income and steady appreciation of the fund value. The underlying securities generate interest at a fixed rate throughout the tenure for which you stay invested in the fund. The fund manager of a debt fund invests in the underlying securities on the basis of their respective credit ratings. A higher credit rating indicates that a debt security has a higher chance of paying interest regularly along with repayment of the principal upon expiry of tenure. Apart from that, the fund manager aligns his investment strategy according to the overall interest rate movements.
You don’t lose even a day's growth when you invest in an open-ended debt fund. If you invest in a fixed deposit or a closed-ended debt mutual fund, you get a lump sum amount at the end of the term. Hectic work schedules and busy lifestyles mean you may take some time to encash the fixed deposit and then reinvest the proceeds. In a debt mutual fund, there is no such problem because the investment never stops growing till you redeem it.
As Debt Mutual Funds mainly invest in debt securities, they are relatively more stable than equity investments. They can also lend stability to your equity portfolio by reducing the risk associated with your complete investment portfolio.
Debt Mutual Funds invest in a range of interest bearing instruments such as Treasury Bills, Government Securities, Corporate Bonds, Money Market Instruments and other debt securities.
This publication is for general circulation only. It does not form part of any offer or recommendation, or have any regard to the investment objectives, financial situation or needs of any specific person. Before committing to an investment, please seek advice from a financial or other professional adviser regarding the suitability of the product for you and read the relevant product offer documents, including the risk disclosures, which can be obtained from DBS Bank India Limited. If you do not wish to seek financial advice, please consider carefully whether the product is suitable for you. Investment into fixed income securities exposes investors to credit and interest rate risks.