Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Tuesday, June 25, 2013

How Debt Mutual Funds Work?

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

Debt funds generate returns by investing in bonds or deposits of various kinds. Find out more about them...

 

Debt funds are a type of mutual fund that generate returns from their investors' money by investing in bonds or deposits of various kinds. These terms basically mean that they lend money and earn interest on the money they have lent. This interest that they earn forms the basis for the returns that they generate for investors.

 

A bond is like a certificate of deposit that is issued by the borrower to the lender. Even individual investors do something similar when they do something as simple as make a fixed deposit in a bank. When you make an FD with a bank, you are basically lending money to the bank. You can also buy bonds, for example the tax-rebate bonds issued by various companies like REC and HUDCO.

 

This is exactly what debt funds do, except for a few differences. One, they are able to invest in many types of bonds that are not available to individuals. For example, the Government of India issues bonds. It is in fact, by far the largest borrower (and thus bond-issuer) in the country. Individuals cannot buy government bonds. Bonds are also issued by many large and medium sized businesses in the country. Mutual funds also invest in these.

 

A simple way of understanding debt funds is to think of them simply as a way of passing through the interest income that they receive from the bonds they invest in. There are a couple of further complexities to this.

 

One, unlike the FDs that individuals invest in, mutual funds invest in bonds that are tradable, just like shares are tradable. The way there's a stock market where shares are traded, there's also a debt market where bonds of various types are traded.

Two, on this debt market, the prices of different bonds can rise or fall, just like they do on the stock markets. If a mutual fund buys a bond and its price subsequently rises, then it can make additional money over and above what it would have made out of the interest income alone. This would result in higher return for investors. Obviously, the opposite is also true.

 

But why would bond prices rise or fall? There can be a number of reasons. The major one is a change in interest rates, or even the expectation of such a change. Suppose there's a bond that pays out interest at a rate of 9 per cent a year. Then, the interest rates in the economy fall and newer bonds start getting issued at 8 per cent. Obviously, the old bond should now be worth more than earlier. After all, a given amount of money invested in it can earn more money. Its price would now rise. Mutual funds that hold it would find their holdings worth more and they could make additional profits by selling this bond. Again, obviously, the reverse could happen when interest rates rise. Despite the expectation of safety, such a situation could actually result in some losses for a bond fund

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

No comments:

Post a Comment

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts