What is a Debt Mutual Fund?

A debt mutual fund is a scheme that invests predominantly in bonds, fixed income and money market instruments. They are further classified based on the type of instruments they mainly invest in. Since not all debt instruments are same, debt mutual funds are generally considered medium to low risk. There are debt funds that invest in risky bonds as well and you must be prudent while choosing a debt fund. Some debt funds invest predominantly in government securities and therefore benefit from the sovereign guarantee. Debt funds are subject to credit risk and interest rate risk.