If you thought mutual funds were all about stocks/equity, you are probably not alone! This may be a common perception, but mutual funds have more to them than just equity. They offer something for every investor, and debt mutual funds are a huge part of their offering.
Debt mutual funds invest your money in fixed income instruments like bonds, Government securities, and treasury bills, aiming to generate returns. What you are doing here is lending money to other corporates or to the Government and getting interest on this lending. In this process of lending, the borrower issues to the lender, say, a bond. Let us understand debt mutual funds returns and how debt funds work in detail.