What are debt funds?

Debt funds are mutual funds that invest in fixed income securities like treasury bills and bonds. They are generally safer than equity mutual funds. Debt funds are often seen as a tax-efficient alternative to bank FDs.

Debt funds invest in securities of various types: government backed securities, bonds, top rated corporate deposits etc. These securities are usually given a credit rating based on the risk of credit default associated with them. Most debt mutual funds invest in a range of securities depending on their mandate.

Scripbox selection process aims to select funds that provide superior post tax returns compared to FDs with high safety of capital.

Long term Instrument RatingsShort term Instrument RatingsRisk Classification
SovereignSovereignGovernment Backed Instruments – No Credit Risk
AAAA1High Degree of Safety – Lowest Credit Risk
AAHigh Degree of Safety – Very Low Credit Risk
AA2Adequate Degree of Safety – Low Credit Risk
BBBA3Moderate Degree of Safety – Moderate Credit Risk
BBModerate Risk of Default
BA4High Risk of Default
CVery High Risk of Default
DIn Default or expected to be in Default on Maturity

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