Before delving into its many benefits, let us first review what debt mutual funds are and how they work. Debt funds typically refer to mutual fund schemes that invest in a variety of fixed-interest earning instruments such as corporate bonds<\/a>, government bonds, debt securities, and debentures. Contrary to common belief, debt funds come in a wide variety of categories that range across tenures and risk appetites. Some popular categories of mutual funds<\/a> include liquid funds<\/a>, overnight funds<\/a>, gilt funds<\/a>, money market funds<\/a>, and dynamic bond funds<\/a>. Investors are recommended to invest in debt funds offered by reputed institutes and managed by professional fund managers<\/a> that can efficiently invest in high rated credit instruments.<\/p>\n\n\n\n Additional Read<\/strong>:\u00a0Understanding Mutual Fund Terminologies<\/a><\/p>\n\n\n\n There are a number of\ndistinct benefits that debt funds can bring along to your investment\nportfolio. Here is a look at some of the major advantages of debt mutual funds:<\/p>\n\n\n\n One of the highlights of investing in debt funds is that you can enjoy the benefits of an extremely liquid investment. As an investor, you have the option of withdrawing your debt fund investment whenever you require it most, and have it reflected in your bank account within just a day. Compare this to other fixed income instruments such as Fixed Deposits that require extensive paperwork and penalties, and the difference in liquidity becomes apparent. <\/p>\n\n\n\n As our life circumstances and priorities\nchange over time, so does our risk appetite. There are bills to be paid and\ndependents to be looked after, which is why your investment portfolio should\nhave a component to help you manage risk along the way. Debt funds help investors achieve this goal\nas they carry lower risk and are less volatile than other forms of\nmarket-linked instruments such as equity funds. By adjusting your debt fund instruments,\nyou can considerably manage the entire risk factor of your portfolio.<\/p>\n\n\n\n While tax benefits are not a prerequisite\nfor an investment, the most efficient investments in your portfolio are\ncertainly expected to offer this distinct advantage. Debt mutual funds are helpful\non this front, however, equity\ninstruments are more tax efficient than debt instruments. Long term capital\ngains is 10% for equity MF and 20% post indexation for debt MF. Long term\ncapital gains apply after 3 years of investment horizon. STCG for debt is as\nper tax slab and for equity it is 15%.<\/p>\n\n\n\n Among the various investments in your portfolio, debt funds can certainly contribute to the factor of flexibility. You can invest into your debt funds by the way of Systematic Investment Plans, or SIPs<\/a>, whenever you get your hands on any additional income. You can also set up a Systematic Withdrawal Plan, or SWP<\/a> to conveniently withdraw from your debt fund investment as per your needs.<\/p>\n\n\n\n While\nyou might have made a number of investments to provide you with varying degrees\nof interest amounts, your portfolio can also benefit from having a stable,\nregular source of income in the mix. \nThis purpose is well served by debt mutual funds that might yield lower\nreturns than your other investments, but will always be more stable, regular\nand predictable.<\/p>\n\n\n\n Additional Read: <\/strong>The SMART approach to your first financial plan<\/a><\/p>\n\n\n\n To make this debt fund\ninvestment even easier, you can try the Moneyfy app from Tata Capital which lets you browse through and\ninvest in a number of suitable mutual funds with just a few taps.<\/p>\n\n\n\n Here\u2019s a list of steps you need\nto follow to invest in debt mutual funds through the Moneyfy app:<\/p>\n\n\n\n 1. Download the Moneyfy app from Google Play Store<\/a> or Apple\u2019s App Store<\/a><\/p>\n\n\n\n 2. Enter your mobile number to proceed after which you will receive an OTP. Enter the OTP<\/p>\n\n\n\n 3. The app will prompt you to enter your e-mail id and name \u2014 as it appears on your PAN card<\/p>\n\n\n\n 4. Set an MPIN and note it down for future reference<\/p>\n\n\n\n 5. You will get a prompt to set up fingerprint authentication if you want to<\/p>\n\n\n\n 6. Click on Investments<\/p>\n\n\n\n 7. You will be shown several options \u2014 click on Debt Funds<\/p>\n\n\n\n 8. You will be shown multiple Debt Fund options to choose from <\/p>\n\n\n\n 9. Select the debt fund of your choice based on your financial goals<\/p>\n\n\n\n 10. Complete your KYC in 5 minutes and start your investment<\/p>\n\n\n\n Debt funds add significant value to the portfolio of the average investor. No matter what your financial priorities are, and whether your focus is on short term or long term goals, there are a variety of debt mutual funds you can choose from to meet your specific requirements. <\/p>\n\n\n\nAdvantages of Investing in Debt Funds<\/strong><\/h2>\n\n\n\n
1. Greater Liquidity <\/strong><\/h3>\n\n\n\n
![\"Benefits](\"\/wp-content\/uploads\/2020\/09\/debt-mutual-funds-2.jpg\")
<\/figure>\n\n\n\n2. Reduce Risk in Your Portfolio<\/strong><\/h3>\n\n\n\n
3. They Offer Tax Benefit <\/strong><\/h3>\n\n\n\n
4. They Offer Flexibility <\/strong><\/h3>\n\n\n\n
5. Provide Stability and Regular Income<\/strong><\/h3>\n\n\n\n
Conclusion<\/strong><\/h3>\n\n\n\n