Debt Funds

Based on the types of debt instruments invested in and their maturity period, Debt Funds can be categorized as follows:

Overnight Funds: These funds focus on securities with overnight maturity, ensuring high liquidity and minimal credit and interest rate risks.

Liquid Funds: Invest in securities with a tenure of up to 91 days, prioritising liquidity and offering lower returns with reduced risk through money market instruments.

Ultra-Short Duration Funds: Venture into instruments with maturities spanning three to six months, exploring longer-term securities compared to liquid funds.

Low Duration Funds: Target short-term debt securities with a maturity of six to twelve months, appealing to investors seeking one-year borrowing options.

Money Market Fund: Invest in money market instruments with a maturity of up to one year, catering to investors with short-term financial goals and emphasizing capital preservation and liquidity.

Short Duration Funds: Invest in securities with maturities ranging from one to three years, providing stable returns with moderate risk, suitable for short-term investment goals.

Medium Duration Funds: Invest in short-term debt securities with a maturity of three to four years, offering an alternative to fixed deposits with the potential for higher returns.

Medium to Long Duration Funds: Invest in long-term debt securities with maturities between four to seven years, appealing to investors seeking longer-term commitments but with higher associated risks.

Long Duration Funds: Invest in debt securities with a maturity exceeding seven years, presenting higher default risks but offering the potential for higher capital gains for long-term investors.

Dynamic Bonds Funds: Invest in debt securities across various maturity profiles based on interest rate changes, providing flexibility for fund managers to navigate short and long-term instruments, effectively mitigating interest rate risk.

If you choose the dividend option in debt funds, you will earn dividends at regular intervals. These dividends would, however, be taxable in your hands at your income tax slab rates.

No, debt mutual funds do not have a lock-in period.