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Debt Fund Investment for salaried

  • Dec 10, 2018

Debt Fund Investment for Salaried

As salaried individuals, we earn, we spend, but do we ever focus on investments? This section of the population has fixed monthly cash inflow based on which they manage savings, meeting expenses and financial goals.

 

In order to fund the long or short-term goals, there can’t be a better alternative than debt mutual funds to grow your wealth in a steady manner.

 

Debt mutual fund investment for salaried individuals invest in fixed income securities like treasury bills, government bonds, corporate bonds, commercial papers and other money market financial instruments. Compared to equity funds, debt fund units are less risky and offer lower returns. All debt mutual fund instruments have a pre-defined maturity date and interest rate so that buyers can earn a fixed income in return. The returns are independent of the market fluctuations, unlike high-risk option like equities. 

 

Let’s look at the types of debt mutual funds, available for salaried individuals:

 

Ultra-short Duration Fund:This type of fund primarily lets you invest in money market financial instruments, including treasury bills, commercial papers, and certificates of deposits. The maturity of Ultra Short Duration funds varied from 3 to 6 months. 

 

Corporate Bond Fund: As a salaried individual, you can invest in corporate bond funds. As per SEBI, corporate bond funds invest a minimum of 80% of the total assets in AA+ and above rated bonds. As compared with government bonds, the yields from corporate funds are better. 

 

Dynamic Bond Funds:These are open-ended funds where you have the flexibility to invest in debt and money market instruments depending on the interest rate, credit quality and other factors.

 

Gilt Funds: These debt mutual funds are the fixed securities issued by the Central and State Government in India. As per the SEBI regulation, around 80% of the total assets under Gilt Funds need to be invested in government securities.

 

Short, Medium and Long Duration Funds: All of these debt funds invest in money market and debt fund instruments. The duration of short duration fund ranges from 1 year to 3 years, while for a medium fund it varied from 3 to 4 years, and the maturity of long duration funds is more than seven years.

 

Credit Risk Fund: The fund invests 8% of the total assets in AA rated papers and below rated corporate bonds. 

 

Liquid Funds:With a maturity of 91 days, liquid debt fund allows you to invest in debt and

money market financial instruments. 

 

Banking and PSU funds: As the name suggests, banking and PSU funds invest 80% of the total assets in public sector undertakings, public financial institutions and banks.

 

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