Debt Funds
Lend money to institutions that are considered the safest investments. Gain regular interest amount and return of principal amount on maturity.
Debt funds
Debt funds are loans given to private and government institutions. These investments consist of invest who collectively lend money to corporate and government firms having an AMC in-between. The firms that borrowed the money will pay regular interest amount on the promised period and return back the premium on the maturity period. These types of investments have regular returns and does incur loss at any time to the investor.
Who should buy debt funds
Debt funds are suitable for investors who look for safe investment and look for a huge amount at the end of the investment period. Debt fund investors receive rate of interest for their investment. Even though debt funds are safe investments, their rate of interest could slightly be volatile based on the market conditions.
Equity funds generally gain returns with the increase in market value of the stocks. When the company performs well the market demand increases and buyer tend to pay more than the current price of the stock.
Debt funds gain returns based on the rate of interest. These rates of interest are fixed and regular. Irrespective of the borrower’s performance the rate of return remains constant. The demand for debt fund increases when a bond is nearing to its maturity.
In private entities, there is an option called as convertible debentures where the investor can convert his investments to equity. Other than that, there are no options for the investor to gain advantage over companies’ capital.
Facts to be considered
As equity funds are associated with high amount of risk factor. It is advised to consider certain facts before analysing the equity fund before investing. Such Factors are listed below.
Sector
Investing in private and public sector are two different things with unique performances. The private sector is always knowns for higher returns and higher risks. Whereas in government sector the returns are comparatively low but they are safely backed by the government.
Past performance
Analysing the mutual funds past performance is one important analysis the investor has to consider before investing. A fund which is volatile in the past could follow the same pattern in future. The investor has to analyse such things before investing.
Market condition
When a market condition is volatile for private firms is better to opt a government bond. The same applies for government bonds during any economic disruption. The investor has to consider the market condition respective to the fund before investing.