Debt funds invest in debt securities issued by the government, public sector units, banks and private limited companies. Debt securities may have different features. They may have credit risk or risk of default, short-term or long-term duration. Debt funds are offered in THREE broad categories:

Short term funds:These funds FOCUS primarily on accrual income and shorter maturity, and have a lower risk and stable return.

Liquid funds can only invest in securities with not more than 91 days to maturity. This is a regulatory requirement. These funds primarily earn coupon income in line with current market rates

Ultra-short term funds hold a portfolio similar to liquid funds but with a slightly higher maturity to benefit from higher coupon income.

Short-term GILT funds invest in short-term government securities such as treasury bills of the government.

Short-Term Plan invest in a portfolio of short-term debt securities primarily to earn coupon income but may ALSO hold some longer term securities to benefit from APPRECIATION in price.

Long term funds:These funds focus on MTM gains and longer maturity, and have a higher risk and higher return.

Gilt funds invest in a portfolio of long-term government securities. The coupon income earned is lower than corporate bonds of comparable tenor since there is no credit risk in the securities. The MTM gains and losses can be high since these securities have long tenors.

Income funds invest in a combination of corporate bonds and government securities. They earn a higher coupon income from the credit risk in corporate bonds held. The gains or losses from MTM will depend upon the tenor of the securities held.

Dynamic funds: These funds shift their focus between short and long term debt instruments, depending on the expectation for interest rate, and provide moderately higher return than short term funds, at a moderately lower risk than long term debt funds

Debt funds invest in debt securities issued by the government, public sector units, banks and private limited companies. Debt securities may have different features. They may have credit risk or risk of default, short-term or long-term duration. Debt funds are offered in three broad categories:

Short term funds:These funds focus primarily on accrual income and shorter maturity, and have a lower risk and stable return.

Liquid funds can only invest in securities with not more than 91 days to maturity. This is a regulatory requirement. These funds primarily earn coupon income in line with current market rates

Ultra-short term funds hold a portfolio similar to liquid funds but with a slightly higher maturity to benefit from higher coupon income.

Short-term Gilt funds invest in short-term government securities such as treasury bills of the government.

Short-Term Plan invest in a portfolio of short-term debt securities primarily to earn coupon income but may also hold some longer term securities to benefit from appreciation in price.

Long term funds:These funds focus on MTM gains and longer maturity, and have a higher risk and higher return.

Gilt funds invest in a portfolio of long-term government securities. The coupon income earned is lower than corporate bonds of comparable tenor since there is no credit risk in the securities. The MTM gains and losses can be high since these securities have long tenors.

Income funds invest in a combination of corporate bonds and government securities. They earn a higher coupon income from the credit risk in corporate bonds held. The gains or losses from MTM will depend upon the tenor of the securities held.

Dynamic funds: These funds shift their focus between short and long term debt instruments, depending on the expectation for interest rate, and provide moderately higher return than short term funds, at a moderately lower risk than long term debt funds