REAL ROLE OF DEBT FUNDS



1. Debt funds essentially lock in their corpus in debt instruments with varied rates of interest, but no promise for a definite return.
2. They are not guaranteed instruments, but offer a capital preservation approach to investing.
3. This requires you to be clear if you want to preserve the principal and generate some positive return at the end of the term, or also want some regular returns along with protecting the principal.
4. If the debt investments are timed with the peaking of the interest rate cycle, investors can also make modest capital gains.
5. The ease of liquidity and safety of investment is, therefore, the prime factor in going for debt funds.