Introduction to debt ETFs

Equity and debt are two primary asset classes. While equity is volatile and holds high growth potential, debt tends to be steadier and offers predictability. Arriving at an appropriate asset allocation is about deciding the optimum mix of equity and debt in your portfolio. Unlike the stock market, the current structure of the Indian bond market makes it very difficult for Indian retail investors to buy/sell bonds directly. Thus, several investors resort to debt funds for adding bonds to their portfolios. Another cost-effective way of adding bonds to one's portfolio is debt ETFs (exchange-traded funds). Like equity ETFs comprise stocks of the underlying index, debt ETFs are passive investment instruments that invest in fixed-income securities in the same proportion as the underlying

This article was originally published on November 28, 2021.