What is a Debt Fund?
A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which
- Core holdings are fixed income investments.
- The fund may invest in short-term or long-term bonds, securitized products, money market instruments or floating rate debt.
- It refers to bonds or other debt instruments that will mature in more than one calendar or fiscal years.
- The examples of such funds are Corporate and Government Bonds, Corporate Debt Securities and Money Market Instruments which offer capital appreciation.
- Also they are referred as Fixed Income Funds or Bond Funds.
There is always a feeling that investment in Debt Funds are risk free and that they provide more returns than other investments. Here is an article which gives a clear idea about this misconception.