The range of debt funds

The categorisation of debt funds is simpler than that of equity funds. A debt fund investment, like a bond, is defined by two characteristics - its maturity and its credit rating. Maturity is a straightforward enough concept that you will encounter when learning how debt funds work. The maturity date of a bond is the date on which the principal value of a bond is to be returned to the investor in full. A change in interest rates could make a particular bond more or less valuable. When interest rates fall, older bonds that are locked into a higher interest rate are worth more. Conversely, when interest rates rise, older bonds that are locked into a lower interest rate are worth less. If you think about it, this rise or fall in a bond's value has to be proportional to how much time is left for the bond to mature. This makes perfect sense. For example, when interest rates fall, all older, higher-interest bonds gain value, but one which has ten years left until maturity will gain more value than one which has only on

This article was originally published on September 02, 2020.