Debt Schemes
Types Of Debt Funds
Floater Funds
Floater funds invest at least 65% of their assets in floating-rate securities.
Medium Duration Funds
These debt funds invest in debt instruments with a three- to four-year Macaulay Duration.
Dynamic Bond Funds
Dynamic debt funds can invest in a variety of different types of debt funds. Fund managers invest in accordance with the market's current interest rate cycle.
Banking And PSU Funds
These funds invest at least 80% of total fund assets in debt instruments issued by banks, public sector entities, and public financial institutions.
GILT (Government Issued Long Term) Funds
These are debt funds that invest at least 80% of their fund capital in government securities with varying maturity dates. While GILT funds have minimal default risk, they have a high interest rate risk.
GILT Funds With 10 Years Constant Duration
These debt funds invest at least 80% of their assets in government securities with a fixed 10-year duration. Due to the constant Duration, the interest rate risk associated with these funds is very consistent.
Ultra-Short Duration Funds
Investments in ultra-short duration funds are made in debt instruments with a Macaulay Duration of three to six months. They often offer higher returns than fixed-income investments.
Low Duration Funds
Low Duration funds invest in debt securities with a Macaulay Duration of six to twelve months. Due to the slightly longer duration of these funds, they are regarded to be slightly riskier than ultra-short duration funds.
Overnight Funds
Overnight debt funds invest in debt instruments with a one-day maturity. They are ideal for investors looking to park their money for a limited period of time. Similar to savings bank accounts, these are typically regarded as extremely safe investments.
Liquid Funds
Liquid funds are debt funds that invest in short-term debt securities such as treasury bills and commercial papers. They typically invest in high-quality debt instruments with short maturity dates. While the risk is low, the yields are fairly modest as well.
Short Duration Funds
Short Duration funds invest in debt instruments with a Macaulay Duration of one to three years. This implies they can invest in both short-term and long-term items such as government bonds and debentures, business bonds, and so forth.
Medium To Long Duration Funds
Medium to long-term debt funds invests in debt instruments with a Macaulay maturity of four to seven years. These funds entail a significant interest rate risk but may be an attractive option in a lowering interest rate environment.
Long Duration Funds
Long Duration funds are debt funds that invest in debt securities with a Macaulay Duration of greater than seven years. Due to the fact that these funds invest in longer-term securities, they have a higher risk than the other funds described previously. Despite this, long-term debt funds are seen as being less hazardous than equity funds.
Credit Risk Funds
Additionally, credit risk funds invest in corporate bonds. These funds invest at least 65 percent of their entire assets in corporate bonds rated below investment grade. Due to their weaker credit ratings, these bonds pay a higher interest rate to compensate for the credit risk. These are not funds for the risk-averse investor.
Corporate Bond Funds
While all of the funds discussed thus far invest primarily in debt instruments with a long duration, corporate bond funds invest in assets with a high credit rating. These funds invest at least 80% of their assets in the highest-rated corporate bonds. In comparison to other debt funds, they offer the twin benefit of safety and high returns. One should always verify the credit rating of corporate bonds included in the portfolio of the mutual fund in which you invested.