A basic introduction to debt funds

Debt funds are mutual funds that generate returns by investing in fixed income securities, that is in bonds or deposits of various kinds. This means that they lend money and earn interest on it. The interest that they earn determines the basis for the returns that they generate for investors. To better understand debt funds, let's have a look at their underlying securities, mainly bonds. A bond is like a certificate of deposit that is issued by the borrower to the lender. Individual investors do something very similar when they set up a fixed deposit in a bank. When you make an FD with a bank, you are basically lending money

This article was originally published on January 29, 2021.