Exploring 5 Benefits of Debt Mutual Funds

Looking for a reliable investment avenue offering both consistent returns and stability? As a savvy investor, you can check out debt mutual funds!

While the investment buzz revolves around flashy equity funds, debt mutual funds work rather quietly. However, they provide a secure and consistent avenue to park your funds and stabilize your investment portfolio.

Explore why you should invest in mutual funds online along with its several advantages.

What Are Debt Mutual Funds?

Debt funds generally invest in government and corporate bonds, corporate debt securities, and treasury. These investments in fixed-income instruments are designed to beat inflation. As a result, they are less volatile compared to equity funds and earn through interest and capital appreciation.

There are 14 sub-categories under debt funds, all of which involve less risk compared to equity funds. They are most suitable for conservative investors as this investment avenue involves limited risk. Investors often turn to trusted platforms like Dhan to invest in debt mutual funds.

Top 5 Benefits of Debt Mutual Funds

Explore the best benefits of investing in debt mutual funds.

1. Low Portfolio Risk

Compared to equity funds, debt mutual funds are less risky due to their limited volatility. So, if you aren’t hungry for aggressive growth that involves higher market risk, debt funds ensure steady growth.

A strategic allocation to the top debt funds ensures stability and reduces market risk. Investors can make the best of temporary yield opportunities by investing wisely in debt funds.

2. Better Liquidity

Debt mutual funds can be easily encashed by selling off the units. This explains why they are known for their liquidity. Many investors choose this category to stack their emergency funds.

Some debt funds may involve a small exit load or charge for redeeming the units between 3 to 6 months. As an investor, you may also partially withdraw your funds, as needed.

3. Multiple Investment Options

You can choose from short and long-term debt funds. While short-term funds open up the doors for stable and regular income, investors can earn from interest and capital gains by investing in the long term. The safest debt products include liquid and overnight funds.

4. Low-Cost Investment

As per SEBI, the maximum expense ratio for a debt mutual fund is 2% of the assets under management. This low expense ratio makes withdrawals more cost-effective.

5. SIP, SWP and Switching

Investors enjoy the advantage of making regular deposits through SIPs in debt mutual funds.

You can also withdraw a certain amount every month from the fund through systematic withdrawal plans (SWPs). This can largely benefit retirees and individuals requiring a regular cash flow.


Given that some debt mutual funds offer returns beating FDs, investors are keen to benefit from this safe avenue. Based on your risk tolerance and appetite, choose from the best-performing debt mutual funds on Dhan. Check out the historical performance, tenure, and risk level of each fund on this platform before investing!

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