June 07 , 2012
Fixed income funds are known as debt funds or income funds in India. A debt mutual fund invests money in debentures, bonds, deposits and various other forms of debt. It does not invest in stocks. Thus, its returns and risks are comparable to those of deposits, bonds and the like.
Debt funds are of various types depending on the kind and maturity of instruments they invest in. Short term debt (income) funds invest in government/corporate paper. Their duration is usually less than 3 years. Debt funds may be a good source of regular income for people in the higher tax brackets since they are tax efficient compared to bank FDs.
Besides there are monthly income plans (MIPs) that are hybrid in nature. They invest in a fixed proportion of equities and debt. Most of them are biased towards debt. They provide regular monthly income.