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Debt funds are not designed to give steady returns like FDs

Debt funds obviously generate extra returns by taking some additional risk

March 03, 2020 / 10:44 AM IST

Dev Ashish

During the last few years, people got attracted to debt funds as a viable investment option in the fixed income space. But the recent problems have shaken some of the confidence of investors.

Being an advisor, I regularly talk to my clients and prospective ones about this. Many show signs of discomfort with these funds and how negative surprises seem to be becoming more frequent.

And I think this discomfort and unhappiness that debt fund investors have is based on the premise that they never expected this to happen. Why? Because, for them, equity was always a risky bet. It could go up or it could go down. But they had a belief that debt funds were ‘completely safe’. And if something is safe, how could it go wrong?