Debt mutual funds are ideal investments for conservative investors and are suitable for both the short-term and medium-term investment horizons. Short-term starts from 3 months to 1 year, while Medium term is from 3 years and more.
Debt Funds normally invest Debt papers of various issuers and of various tenure like Government Securities, Corporate Bonds, Debentures and Bank Certificate of Deposit etc.
For a short-term investor, debt funds like liquid funds may be an ideal investment as compared to keeping your money in a saving bank account. Liquid funds offer higher returns currently ,in the range of 6-7% along with similar kind of liquidity for meeting emergency requirements.
For a medium-term investor, debt funds like accrual funds can be ideal to ride the interest rate volatility. As compared to 3-5 year bank FD, these debt funds offer higher returns. An investor can also generate a regular Monthly/ Quarterly Income by investing in these Debt Funds.