Debt Funds...

...invest mainly in fixed-income instruments, including government securities, debentures, bonds and so on.

Types of Debt Funds

Debt mutual funds are classified into different types based on the maturity period of their underlying securities. Let's look at some of them.

Overnight Funds

These funds invest in overnight securities or assets that come with a maturity of one day.

Liquid Funds

These funds invest in highly liquid instruments, such as certificates of deposits, treasury bills and commercial papers with a maturity period of less than 91 days...

Liquid Funds

They are less risky. You can also park your emergency funds in them.

Short-Duration Funds

They are mandated to maintain a Macaulay duration of one to three years. They mainly invest in a mix of government and corporate bonds of different varieties.