Mutual funds that invest primarily in fixed-interest assets like bonds and money market instruments to produce income are known as debt mutual funds, which are often referred to as income funds. In essence, the fund offers credit to the bond issuers in exchange for interest payments. The fund distributes the interest it earns to its investors in the form of returns.
The procedure is very similar to setting up a fixed deposit with a bank. Debt mutual funds only differ in that they have a variety of fixed-income assets with various maturities and interest rates. The fund will only select debt securities that will help it achieve its investment objective. Debt funds’ main objectives are to boost investors’ wealth and give them a reliable income.
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