How to invest in fixed income funds?

What are fixed income funds?

Fixed income funds are the type of Funds that give you returns at fixed intervals, which can be monthly, quarterly, or even half-yearly. It is income that is determined at a particular rate and may not be fixed amounts. On a broader view, a mutual fund aims to pull in money from multiple investors like retail investors, corporate investors, and more and then invests them in baskets of Investments. This basket forms what is called a Portfolio. It means your money is invested in a group of investments, that is in the different types of stock and money instruments. On the basis of where your money is invested, fixed income Mutual Funds are classified as asset funds, exchange-traded funds, and debt funds.

The average Indian millennial life at best has just started to peak in the career, and having a surplus fund is still perfect. These are times when salary is limited and more or less utilized for personal causes. Along with that, given the nature of rising inflation and increase in the cost of living, saving has become quite difficult. With Limited savings at the end of every month, using the right type of investment can serve better to build wealth opportunities for the future. Imagine a situation where you get additional money as a surplus to your monthly salary. Here it is quite possible. In the case of fixed-income investments, you know you have a sum of guaranteed and constantly flowing money your way each month, half-yearly, or even yearly. This flowing sum of money can be an extra way for your small-term financial goals.

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Common Types of Debt Funds:

So you mostly already know an overview about fixed income and what it is. A debt fund is a type of fund that invests in fixed return financial instruments like corporate bonds, debentures, certificates, and deposits of Commerce securities. It does not invest in the volatile stock market and has more predictable returns, which are considered to have low risk. It also includes various funds investing in the short term, medium-term, and long term.

Some of the most common types of fixed funds are:

  • General debt:

A General debt fund is which invests in different types of debt instruments, both government as well as private with specific time periods. These instruments take the form of bonds, certificates of deposits, and debentures.

Eg: DSP Government Securities Fund

  • Monthly income plans:

They are funds that give out dividends or interest in regular time periods. It can be given out monthly, quarterly, semi-annually annually, and more. The interest or payouts that an investor will receive from the kind of funds will also depend on how good or bad the market conditions for the fund are. It should not be confused with the post office monthly scheme, as a payout can be skipped if a fund is not performing that well.

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Eg: ICICI Prudential MIP

  • Gilt funds:

It is a fund that invests only in long-term government securities like Government Bonds. The most important fact about this fund is that its rate of return is not stable. For the average gilt fund is 2.5 % in 6 months, then 16% in a year, and maybe 9% in 5 years. Since their turns by delivery, they are not the primary choice among a lot of investors.

Eg: SBI Magnum Gilt Fund

  • Liquid funds:

These are the types of funds that investors choose for short-term investments. It is more like short-term debt instruments at a certificate of deposits, treasury bills, term deposits, and more. The period of these instruments lies between 3 to 6 months approximately. An investor with a real short-term goal is more likely going to be the one to choose this kind of fund, for instance, IDFC Short Term Bond Fund.

The Key Features of Fixed Income Funds:

  • It is focused on providing a regular fixed income to the fundholder.
  • It can serve as a regular source of return for retired people in addition to the pension. It is also of a great deal to investors with a low-risk appetite.
  • It is managed by a team of well-versed fund managers who revise the portfolio regularly in order to make the fund more adaptable and healthy in response to economic changes. You can maintain a stable return in spite of market disturbances and changes in the economic situation while it is managed by market experts and has few to no risks involved.
  • It is a product of high liquidity by allowing the investor to remove their fund whenever they want money.
  • You can avail the benefits of indexation and reduce tax on Returns.
  • You can get better Returns than the normal savings bank account or fixed deposit.

Investing in a fixed income fund means investing in various fixed income products. The following are the types of products you will be investing in the case of fixed income:

  • Treasury Bills
  • Treasury Notes
  • Treasury Bonds
  • Corporate Bonds
  • Certificate of Deposits
  • Fixed Income ETFs
  • And more.


Fixed-income investment means you get offered a steady stream of income over the life of the bond or debt instrument while simultaneously adding access to Capital or money. The steady income lets you plan for future financial goals, and it can also support a retirement portfolio. The interest that comes out of fixed income products can help investors stabilize the risk-return in their investment portfolio, which is known as the market risks.

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There are many benefits to fixed income funds. There are also quite a few risks involved in its such as credit and Default risk, investment rate risk, and inflationary risk. When you look at two sides of the whole, the benefits outweigh the risks involved. It can be a great deal of safer investing in the market, and side by side putting together enough to attain your financial goals.

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shrayan lakhna

Complete startup freak... Founder of Startup Opinions Expert in Google Analytics, ROI Tracking, SEO specialist, social marketing marketer.

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shrayan lakhna

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