Debt fund
Market basicsA mutual fund investing in bonds and other fixed-income instruments.
In plain terms
Not an FD with better returns. It carries credit risk and duration risk, which behave completely differently.
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Glossary
Every term is defined twice: once the way a filing would put it, and once the way somebody would explain it to you across a table. The second one is usually the one that sticks.
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Liquid fund
Market basicsA debt fund holding very short-maturity instruments, with minimal duration risk.
In plain terms
Suitable for an emergency fund. Since the 2023 tax change, roughly equivalent to a sweep-in deposit.
Bond
Market basicsA tradeable loan on which the issuer pays a fixed coupon for a defined term and returns the face value at maturity.
In plain terms
Because the coupon is fixed, the price is what has to move to keep the bond competitive with what new borrowers are paying. That seesaw is why debt funds bought for safety can lose money in a rate-hiking cycle.
Credit risk
Market basicsThe risk that a borrower in a portfolio fails to pay.
In plain terms
Sudden and usually permanent. This is the risk that has caused real Indian debt fund accidents.