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Tag: Debt Funds

  • The Different Types Of Mutual Funds

    There are several distinct types of mutual fund schemes available today, each designed to meet the specific requirements of a particular group of investors. The majority of mutual funds fall into one of three categories.

    Equity Funds, often called Growth Funds

    These investments focus mostly on equity, often known as shares of various corporations.
    The accumulation of wealth or an increase in value for the investment is the key goal.
    They have the potential to provide a bigger return, and as a result, the investments in them should be held for a longer period of time.

    These are some examples:

    “Large Cap” funds are funds that invest largely in businesses that are already quite large and well established.
    “Mid Cap funds” are investment vehicles that focus on mid-sized businesses. funds that invest mostly in enterprises of a medium-sized size.
    “Small Cap” funds are funds that invest in firms that are not very large.
    “Multi Cap” funds invest in a variety of different-sized firms, including both large and small ones.
    “Sector” funds are funds that invest in businesses that are all part of the same “sector” of the economy. For e.g. Technology funds that do not invest in any businesses other than those related to technology
    “Thematic” funds are funds that invest in a certain industry or sector. For e.g. Infrastructure funds that invest in businesses that would profit from the expansion of the infrastructure sector are called infrastructure investment funds.

    Tax-Saving Funds

    Funds of Income or Fixed Income from Bonds or Fixed Sources
    These are investments that are made in Fixed Income Securities, such as Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposit, and Money Market instruments such as Treasury Bills, Commercial Paper, and so on.
    These investments are less risky than others and are good options for anyone looking to generate income.
    Some examples are liquid funds, short-term funds, floating rate funds, dynamic bond funds, gilt funds, and corporate debt funds, among others.

    Hybrid Funds

    These make investments in both equities and fixed income, giving investors the opportunity to benefit from the potential for growth as well as the generation of income.
    Some examples include pension plans, child plans, and monthly income plans, as well as aggressive balanced funds and conservative balanced funds. Other examples include these types of plans and others.

  • When Should You Move To Debt Funds?

    In October 2021, the NIFTY reached its all-time high. The price of stocks was going up. Because of easy monetary policy, low interest rates, and FPI, the world stock market reached all-time highs. Some mutual funds, such as SBI Small Cap and Union Small Cap, had 100% returns.

    How should you invest when the market is very unstable and the NIFTY has dropped more than 25%? Do you have to put all of your money into debt funds?

    What are debt funds?
    Debt funds are types of mutual funds in which the money is invested in different debt securities. The debt funds also buy government and corporate bonds.

    Companies put out debt instruments in order to get money from the market. So, lending is the same as putting money into debt funds. The main reason to invest in debt funds is to get a steady stream of income. The issuers give returns based on a fixed interest rate that everyone agrees on. Because of this, debt instruments are sometimes called “fixed income securities.”

    When your portfolio is losing money is not the best time to invest in debt funds. Instead, the best time is when the stock market is hitting new highs. You can lock in your earnings by putting the money in safe, low-risk debt funds.

    When the interest rate is going up is yet another case. Since the interest rate goes up when the stock market goes down, and vice versa, this often happens when there is a lot of chaos in the stock market.

    It shows the way things are right now in the economy. The market is in a very bad place right now, and NIFTY has lost a lot of its value. In order to stop inflation from getting worse, governments are tightening their monetary policies. One way they are doing this is by raising bank interest rates. Because FD interest rates are going up right now, you might decide to put some of your money into debt funds.

    If you want to invest for the short term, you should invest in debt mutual funds to reduce risk. For short-term capital needs, you might want to think about liquid, ultra-short, low duration, and money market funds. These funds are given out over a six- to twelve-month period.

    Debt funds have low-risk returns and may be good for certain types of investors. There are many different ways to put money into debt mutual funds.

    Bond funds that are managed dynamically move money as interest rates change, which is what the name suggests.

    Income funds are safer than dynamic funds because the fund manager will invest in long-term funds.

    A very short-term fund’s life span is between one and three years. With a short-term investment goal, ultra short-term funds offer stable returns and a lot of cash.

    Conclusion
    If you were thinking of sending money to a debt fund, you should think again! You should buy more stocks when the market is unstable and going down. Debt mutual funds may make your portfolio less risky, but they also make it less likely that it will make money. Debt funds, or FDs, are good investments for short-term investments or for people who are retired and depend on income from investments.