Question

Describe the characteristics of debt funds like debentures and unsecured loans, mortgage loans and leases.

Answer 1

Debt Fund is an investment pool like mutual fund or exchange traded fund. Debt fund invest in high rated fixed income earning investments like State or Central government bonds,various corporate deposits, money market instruments. Investment in debt fund is most safer and less risky. debt funds are managed by the highly professional team and that is why one can rest assured that his or her money is in safe hand.

Some of the positive side of Investment in Debt fund are safety of funds, liquidity, better and assured returns, tax benefits and low transaction cost.

Some of darkside of investment in Debt funds are low rate of return in comparison of other instrument of investment, no control over day to day activities of the fund as professionals are managing the funds etc.