Debt funds are as versatile as equity funds. DSIJ guides on how to use debt funds to complement your equity portfolio.
We have talked a lot about the equity funds in our magazine, however we have till now not looked at the debt funds. The reason being most of you are interested in equity investments as these are made for the long term and give better returns than debt funds in the long term. Nevertheless, as an investor, you need many more options to achieve your financial security and safety. Debt funds provide you such options.
The debt funds come in different shape and sizes. These funds can be used to fulfil your short term as well as medium term needs and can be mixed with equity funds to perk up returns. Unlike the equity funds that are normally used for the long term, the debt funds can be used for the short term too. Even under SEBI’s directive on categorisation and rationalisation of mutual fund schemes, the types of debt funds are more than the types of equity funds. There are 10 categories of equity funds while there are 16 categories of debt funds.
There are various options available in the debt fund category. However, before zeroing down to any category, you should keep the following aspects in mind. At the very basic level, there are only two parameters on which you can gauge the suitability or otherwise of a debt fund for you. First is its maturity period and the second is the credit risk.
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