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Mutual Funds - Advantages of Investing in debt mutual funds

17 Aug 2016

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Debt mutual funds are suitable for investors who are conservative, not active in the market and require regular income. The debt mutual funds not only provide regular income, but they have various advantages over equity investments and other fixed investments.

Some of the advantages of debt mutual funds are:

  • Less volatile than equity market

They are less volatile than equity markets. The debt mutual funds invest in debt securities, where interest income is regular and prices are relatively stable

  • More liquid than fixed deposit

They are liquid as compared to fixed deposit as investors can invest and withdrawal, fully or partially, at any time. However, fund houses levy exit load just like fixed deposits

  • More investment flexibility than fixed deposits

Debt mutual funds are more flexible than fixed deposits. An Investor can choose to change to other schemes, like from a debt fund to an equity fund, in same fund house

  • Returns higher than other debt instruments

The return on debt mutual fund is usually more than Bonds, Fixed Deposits and G-Securities. Changes in interest rates impact the price of bonds. Long-term bonds are more rate sensitive, unlike short-term bonds. Any interest rate cut, eventually shoots up the long-term bond prices, resulting in capital gain to investors

  • Taxation Benefits

After three years of investments, a long-term capital gains tax is levied on debt funds at either 10% without indexation or at 20% with indexation. Indexation is adjusting investments for inflation for holding period. The longer the hold period, the higher the benefit of indexation

 

Source: eCRM Team BACK

To be added soon

Priyanshu B. Tanna

SEBI registered IFA

ARN119467 & EUIN E-183966

To be added soon

Bharat Tanna

SEBI registered IFA

ARN26176 & EUIN E-044509

To be added soon

Kundan B. Tanna

SEBI registered IFA

ARN294073 & EUIN E-553599

Risk factor

Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performances of any Mutual Fund Scheme may or may not be sustained in future. There is no guarantee that the investment objective of any suggested scheme shall be achieved. All existing and prospective investors are advised to check and evaluate the Exit loads and other cost structure (TER) applicable at the time of making the investment before finalizing on any investment decision for Mutual Funds schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a Trailing Commission on client investments. Disclosure For Commission earnings is made to clients at the time of investments. Option of Direct Plan for every Mutual Fund Scheme is available to investors offering advantage of lower expense ratio. We are not entitled to earn any commission on Direct plans. Hence we do not deal in Direct Plans.

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