Old habits die hard. Take Indians’ investment preference – bank fixed deposits (FDs) have topped the householdsavings chart for ages. But with new investment products muscling their way in, it is probably time to ring out the old; though not completely. One available alternate option is a debt mutual fund. This article highlights the benefits of this product.
Type of debt mutual funds
Debt mutual funds are market-linked products that invest across the debt market spectrum. These are primarily divided into two categories: long-term, which includes gilt and long-term income funds, and short-term, which includes short-term debt, ultra short-term debt and liquid funds. Liquid funds, which lie at the short end of the maturity spectrum, offer an alternative to savings bank deposits. Gilt funds, which lie at the long end of the maturity spectrum, are advisable for investors who want to reap the gains of a softening interest rate environment.
