What are Fixed Income Mutual Funds?


Mutual Funds Sahi Hai?

Fixed income mutual funds are those mutual fund schemes whose underlying assets are fixed-income securities, such as - government securities, debentures, corporate bonds, and other money market instruments. These funds are also broadly known as debt funds. Corporate Bond Funds, Dynamic Bond Funds, Banking & PSU Debt Funds, Gilt Funds, Liquid Funds etc. fall under the category of Fixed Income Funds.

A fixed-income mutual fund typically carries features like:

Invests in Fixed Income Securities: It aims to generate returns by investing in bonds and other fixed-income securities. This means that these funds buy bonds and earn interest income on the investments.

Lower Market Volatility: Fixed Income securities have a lower volatility and are less affected by varied market fluctuations.

Diversified Portfolio: Debt funds tend to be invested in both debt and money market instruments (like commercial papers, Treasury bills, and more). This brings forward the attribute of debt funds having a diverse portfolio and can provide higher returns than bank deposits. 

Additional features of fixed income mutual funds are:

  • Debt funds receive interest that is paid by the underlying bonds and debentures in the scheme, along with the possibility of price appreciation. 
  • Also, these funds typically do not have a lock-in period. This means investors can withdraw their money from the fund whenever they want, subject to exit load and other expenses, if any.
  • When fixed-income funds are compared to other mutual funds (like equities), they are known to be relatively low in risk. This also gives your investment portfolio some stability by balancing your portfolio and bringing down the overall risk. 

However, this does not mean these funds are risk-free. They still stand to have some amount of risk associated with it. 

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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