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At what age should you start investing in debt funds?

Don’t think about investing in terms of whether it is the right age or the right time to invest. Focus on what your goals and objectives are.

When it comes to investing in equity, the earlier you start the better it is. An early start gives you the advantage of being invested for a longer period to take advantage of compounding returns. What about investing in debt funds? Do you need an early start or are they more suited for post-retirement regular income needs?

A good first investment

Whether it is debt or equity, the earlier you begin your investing journey, the better it is. There is no minimum age to start, in fact, children can invest too with the help of a guardian. 

Debt funds, however, work differently than equity. In equity, starting early gives you a clear advantage of being invested for a long period and that potentially has a positive impact on returns. However, in case of debt funds, compounding returns is usually not the objective with which they are managed. 

Just like equity funds debt funds are also market-linked. Being market-linked means that the price of the fund will be derived from the market price of securities in the portfolio hence, there will be some volatility from a change in the daily price of the fund. 

If you are new to mutual fund investing, it’s a good idea to start with a simple debt fund and experience market linked investing, it can be quite different from putting your money in a fixed deposit. 

Rather than age link it to goals

Don’t think about investing in terms of whether it is the right age or the right time to invest. Focus on what your goals and objectives are. Debt funds will help you park money for short periods of time, say from a month to a year or two years. If you are looking for relatively low risk, stable return investment where you may need the money any time then debt funds can help. 

If you are new to mutual fund investing, it’s a good idea to start with a simple debt fund and experience market linked investing, it can be quite different from putting your money in a fixed deposit. 

Write down your short-term money goals and pick the appropriate debt fund to match it. 

They can also be used for post-retirement regular income given the relatively lower volatility as compared to equity funds. Moreover, debt funds serve as a good switch over from equity when you are close to completing your long-term goal and want to preserve capital by investing in a low risk product. 

We often try to look for age and time to figure out what is the most efficient way to start investing. In reality, the most efficient way to invest is to just start.

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