Why Should You Invest In Debt Funds?
Mutual Funds have been around for a while. But today, their popularity has reached an all-time high. The reason is that people realise the significance of saving money. They understand the essentiality of building their wealth systematically. Hence, many opt for Debt Funds. Also called Bond Funds, they are a Mutual Fund type that deals with bonds and other debt securities.
They offer high returns and serve as reliable investment options. The following are some prominent reasons that justify their credibility:
Low market risks
In most cases, your investments are exposed to market risks. This narrows the growth of your wealth considerably. But in the case of Debt Funds, you do not face such inconveniences. Since share market fluctuations do not directly impact them, they involve lower risks. Plus, such Funds invest in fixed-income securities with known interest and maturity value. Hence, they are relatively safer than other Equity Funds.
Stable income
The primary purpose of Debt Funds is to offer safe and stable returns. They typically deal with fixed-income securities that promise a steady interest amount. This allows you to have a secondary source of income. Over time, it helps you achieve your monetary goals effectively.
Portfolio stability
Ideally, your investment portfolio should be diversified. It should involve various financial investments like stocks, equity, commodities, etc. But this often increases your market risks considerably. Here, adding Debt Mutual Funds effectively brings down your overall risks. It adds stability and impetus to your investment growth.
Types
They are of different types. Some of them are Money Market Funds, Overnight Funds, Corporate Bond Funds, Liquid Funds, etc. This availability of options helps all kinds of investors. It empowers them to pick one that matches their investment needs.
Accessibility
Earlier, you had to find fund houses and banks to invest in a Mutual Fund. But in today’s digital age, you do not have to waste time doing so. With a few simple clicks, you instantly get access to Debt Fund providers. Also, such providers usually operate on a 24×7 customer service through the Mutual Fund app. Therefore, accessibility is not an issue in any way.
Tax-efficient
They are more tax-efficient than traditional investment channels. Unlike Fixed Deposits, they are taxed in the redemption year. If you hold the Funds for less than three years, you pay Short Term Capital Gains tax. And if your investment goes beyond three years, you pay Long Term Capital Gains tax.
High liquidity
It permits you to redeem your investments and have them back. This helps you in times when you need immediate funding. However, it should be a business day for the withdrawal to be instant.