Debt funds invest in corporate and government bonds and money market securities. They can look simple, but two ideas explain most of how they behave: duration and credit risk.
Duration
Duration shows how sensitive a fund is to changes in interest rates. When rates rise, longer-duration funds tend to fall more. When rates fall, they tend to gain more.
Credit risk
Credit risk is the chance that a bond issuer may delay or fail to repay. Funds that hold higher-rated bonds carry lower credit risk than funds that reach for higher yields.
Matching funds to time horizon
Short-duration and high-quality funds suit shorter horizons. Longer-duration funds need a longer holding period and more patience.
Every scheme’s riskometer and scheme documents explain the risk in detail. Please read them before investing.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully.