Does compounding work for debt funds also?

Does the concept of compounding also work for debt funds?
- Surjan

Compounding works for debt funds as well. However, the problem is that these funds compound at a lower rate. Also, they compound more consistently. So, compounding in a debt fund is almost like a recurring deposit. It yields lower return and so, it compounds slowly. In the case of equity, it compounds erratically. However, in the long run, it is believed to compound faster than a debt fund.

This article was originally published on April 30, 2019.