If you have some funds that you can set aside every month for investment there are various deposits like recurring deposits. And then there is the option to invest in equities, currencies, and commodities. But if you suddenly have a large amount that you can invest then fixed deposits are perfect. There are so many such options when it comes to choosing an investment that suits your financial goals and spending patterns.
When we talk about mutual funds these are funds that are managed by the fund manager. So you would be able to make a deposit and allow the fund manager or the fund management company to invest them in the ideal locations. There are equity funds as well as non-equity funds available. Equity funds are invested in stocks. Non-equity funds are invested in debt-income securities or in gift funds. There are various non-equity funds available. Debt mutual funds are one of the most popular when it comes to non-equity funds.
Here are of the benefits that debt mutual funds offer:
The market volatility affects equity mutual funds. But debt funds are not impacted by it. There are various places where debt mutual funds are invested and all of them are stable bonds and securities.
Stability and flexibility in one
Fixed deposits and other such long-term investments are often bound by some rigid terms. But the flexibility in debt mutual funds is what makes them favorable. You either choose to invest a bulk amount or you can invest smaller funds as and how your savings grow. For smaller sums or larger sums debt mutual funds are suitable for both.
Tax benefits increase for long-term choices
If you choose debt mutual funds, in the long run, you would be able to save more on tax than with other similar deposits. The indexation benefit is what gives the debt mutual funds an edge over the others. Because for tenures more than a year the returns are often seen as capital gains for the long term. So there is a relatively lower tax deducted.
Besides all the above benefits there is also an inherent security attached to debt mutual funds due to the instruments in which the funds are invested. The market risks thus do not have a role to play in these funds as with conventional mutual funds.