Posted in Finance, Accounting and Economics Terms, Total Reads: 400
Definition: Debt Fund
Debt fund is a pool of investment by different individuals which may be mutual fund / exchange-traded fund and are reinvested in fixed income securities like treasury bills or bonds. The main objective of investment is the preservation of the invested capital and generation of income.
Hence, in general, the investors are low risk takers (low volatility in market) and the generated return is low compared to the equity bonds and so is the fee charged for the process since overall management cost is low.
Various investment options for debt funds include short-term, medium-term, long-term bonds, money market instruments, gilt funds, fixed maturity plans etc.
A company ABC may collect the investment pool of 50 individuals totally 50 and may invest in medium term bonds depending on the risk appetite of the investors and a proportion of the return is charged as a fee for this process.