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How to invest in debt mutual funds?

If you have decided on investing in debt funds, then the next step is to understand how to invest in debt funds. Apart from the procedural steps, there are a few things to do before you begin investing.

What are debt mutual funds?

With debt mutual funds, you are basically investing in loans. In simple words, when you invest in a debt mutual fund, the fund manager takes the corpus and lends it to the Government and Corporates in return of bonds that have a fixed maturity and interest. These bonds are traded in the bond market. The returns from debt funds are garnered in two ways- from the interest income of the bond and also from the change in bond prices in the debt market owing to interest rate fluctuations. Read more about how debt funds work, Here

They are suitable for investors with relatively lower risk appetites since they invest in debt securities that are relatively less volatile than equity stocks. You can invest in debt funds for both, your short-term, and long-term goals, given that you have mapped your investment horizons and risk appetites to the kind of debt mutual fund schemes you are looking to invest in. Debt funds can help you bring in diversity to your portfolio at a market risk which is relatively lower than that of equity schemes, in addition to being tax-efficient. Investing in debt funds can provide you with the liquidity that a traditional investment may lack in. There are many types of debt funds that come with different investment objectives and may be ideal for different types of goals

Choose debt funds as per your goals

Once you are clear on how debt funds work, the next step is to determine your goals. The choice of debt fund will depend on how far your goal is. For example, if your goal is to buy a new car next year, your investment horizon will be longer than your goal of paying your child’s annual school fee. The former is also more flexible in nature, than the latter. If you postpone or advance the goal by a few months or years, it may not make much difference; however, the school fee is a non-negotiable goal and can’t be moved.

There are debt funds available for different types of risk appetites and investment horizons, depending on your goals. When investing in debt funds for a short-term goal, you may like to limit the risk exposure. On the other hand, when you are investing in debt funds for a long-term, you may be alright with a certain amount of risk. If you are wondering how to invest in debt funds online, here are a few quick and easy steps. If you want to invest in debt funds for the long-term, click Here to know which types can suit your requirements.

How to invest in debt funds?

Investing in debt funds is easy once you decide which route you want to take. You can either invest directly with the fund house or through a mutual fund distributor. In the latter case, they may have their own investing portal. However, the below steps are common in both the routes


Once you have invested, a new folio number will be created, and you will receive an email from the fund house with the details of your investment. Thereafter, the fund house will keep sending you regular updates about the fund or any changes in its investment objective, expense ratio, etc.

KYC is a mandatory requirement before you invest in any financial instrument as per the directive from the Securities and Exchange Board of India (SEBI). To know more about KYC, Here

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.

Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully

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