Debt funds belong to the conservative category of mutual funds which invest the corpus in the securities thus providing fixed income. The instruments can be corporate & government bonds and money-market instruments which get matured in different tenures. They provide a steady and consistent growth of the amount invested but the returns are limited. It has 16 subcategories based on the maturity period and portfolio selection, namely:
As the name suggests, the securities of this category of mutual funds mature in 1 day.
These schemes invest in debt securities and money market instruments which get mature within 91 days.
Ultra Short Duration Funds
Maturity period of instruments of this category is 3 to 6 months.
Low Duration Funds
Maturity period of instruments of this category is 6 to 12 months.
Money Market Funds
These MFs invest only in the money-market instruments and have a maturity period of up to 1 year.
Short Duration Funds
Mutual Fund Schemes of this category have portfolio of debt instruments with an average maturity period of 1-3 years.
Medium Duration Funds
Mutual Fund Schemes of this category have portfolio of debt instruments with an average maturity duration of 3-4 years.
Medium to Long Duration Funds
These funds have portfolio with a maturity period of 4-7 years.
Long Duration Funds
This category has portfolio with maturity duration of more than 7 years.
Dynamic Bond Funds
This category of debt mutual funds has no boundations on portfolio selection and the securities can be include of any maturity period.
Corporate Bond Funds
These funds are bound to invest at least 80% of the corpus in corporate bonds.
Credit Risk Funds
In this category, a minimum of 65% of the corpus is invested in corporate bonds of below the highest-rated instruments.
Banking and PSU Funds
A minimum of 80% of the corpus is allocated in debt instruments of banks and PSUs.
More than 80% of the total corpus is invested in G-secs.
Gilt with 10 year Duration
More than 80% of the total corpus is invested in G-secs with maturity duration of 10 years.
These MF invest more than 65% of the corpus in floating rate instruments.