June 07 , 2012
Debt Funds, invest their money into different forms of debt securities - bank fixed deposits, company deposits, etc. Thus, in terms of the returns you can earn from such funds, fixed deposits are the closest comparison. However, unlike these deposits themselves, the funds do not provide a fixed or guaranteed return. But they happen to be very tax efficient and can at times give you handsome returns too.
Debt Funds themselves can be of various types. Some invest in long maturity Government debt, and are called long-term debt funds. Others stick to very short maturity paper, and are called Liquid or Cash Funds. Intermediate ones are called short-term debt or Income Funds.
Equity Funds, Monthly Income Plans (MIPs), Balanced Funds, Gold Funds, etc are other types of mutual funds available in the Indian market today.