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As investors, we are constantly seeking for regular returns with low risk. Due to this, we tend to be drawn t fixed deposits as a means of investment. With its present interest rates and recurring annual returns, this option can be a tempting one. However, the returns might not be of the quality of mutual funds. But what if there is a middle ground that exists between the tools of equity mutual funds and fixed deposits? Wouldn’t it be great to be able to invest in such a product that only works at a low-risk factor but also guarantees you good returns? It’s possible only through something we call as debt Mutual funds. This investment is capable of generating an income for the investor in the short term in opposition to long term wealth creation that is offered by mutual funds. Debt funds are a type of mutual fund that generates returns from their investors’ money by investing in bonds or deposits of various kinds. It means that the money is lent with a benefit of earning an interest. This interest forms the basis for the returns that they generate for investors. If not mutual funds, they are a type of mutual funds that generates returns from their investors’ money by investing in bonds or deposits of various kinds. What this means is, you lend some money and earn interest over it. This interest you earn forms the basis for the returns your funds generate. Here, a bond is like a certificate of deposit that is issues by the borrower to the lender. When we open up a fixed deposit in a bank, we do something similar to what these debt funds do. This means, when you make an FD with a bank, you are actually lending money to the bank itself. A major reason why debt mutual funds prove to be an effective choice is due to its tax-saving quality. The incomes gained through them are subject to a tax of as little as 10-15%. In the other hand, the income you might gain through fixed deposits is charged with a much higher tax liability. Also, debt funds are highly liquid making them ideal for investors who aim to achieve short term financial goals. Unlike FDs, where penalties are applicable for withdrawing money before maturity, debt funds are not subject to any penalties after the first month of depositing. In addition, debts funds also allow partial withdrawals of the principal amount. All in all, there are multiple reasons why one should choose debt funds above every other investment in the market irrespective of short-term or long-term benefits
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mutual funds, fixed deposite,
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