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A debt fund involves investments in bonds and debt securities. Debt funds not just pays dividend periodically but also delivers periodic realized capital appreciation. The major reason why investors prefer debt funds are because they are more liquid than fixed deposits. They can be withdrawn at any time and some funds don't even have an exit load, if the investments are redeemed within six months. Debt funds are also tax efficient, and the efficiency is known to increase in long run. Investments can also be done through SIPs (Systematic Investment Plans). Debt funds comes in various forms - liquid fund, ultra short-term, medium-term, dynamic bond, long-term corporate bond funds and gilt funds.
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