How to invest in fixed income funds?

Are you a mutual fund investor Or a newbie in the stock market looking for ways to diversify your portfolio? Investors are always looking for ways to diversify their portfolios. It is because fund Advisors always suggest the investors make sure that they spread their finances across every asset class and industry. 

The beauty of a mutual fund is that it gives investors an opportunity to generate income from different sectors and industries with one unique investment. But it is still better to make a financial plan before going ahead with investments. It gives investors a fair idea about how to invest and how much money they need to invest in order to reach closer to the ultimate financial goal that they have set.

Pre-planning, strategies, and fixed income fund

The financial goal of an investor can vary depending on the individual. For instance, someone might be having a retirement plan in their youth and now maybe into making a retirement Corpus. If a particular individual needs at least 25 lakhs to 40 lakhs but has only 10 to 15 years remaining before he or she retires, This particular investor might need to look for an aggressive team that may hold the potential to offer them the desired capital appreciation within that time zone. It is exactly why it is necessary for pre-planning and strategies so they can be able to implement the feasible investment strategy to get those goals.

But just because you have less time than would be needed, does it mean you cannot generate x y z amount of income in a particular period? All you need is an aggressive scheme and expect your investment objective to be achieved. But just remember that aggressive investment schemes are highly volatile in nature and if you are investing in the market in funds like Mutual Funds, there is a good chance of your portfolio incurring losses. That is when calculated risks while investing come into place. So it is essential for an investor to determine the risk appetite. There are various funds out there that offer different risk profiles. And one of them is fixed Income Funds.

What is a fixed income fund?

A fixed-income fund or more popularly known as a debt fund is a fund that invests in fixed income securities like Government Bonds, corporate securities, money treasury bills, debenture certificates of deposits, and much more.

How would you choose your fixed-income fund?

There are some of the primary reasons why you would want to invest in fixed income funds, and it would be based on these major reasons:

1. It is ideal for meeting the short-term goal

Mutual funds and equity funds are highly termed for long-term goals if you have a retirement plan or plan on getting your own home. If you have some short-term goals, you can invest in fixed income funds to achieve that goal. Just say you invest in the SBI debt hybrid fund; over 10 years, the fund has given 147.3 6% absolute return in the market. But along with excess return also comes under a blend of risk, which you must be ready to take. Fixed income funds are ideal to meet short-term goals. Like planning a short-term vacation, renovating your home, and making the down payment of your new luxury car. When you have an investment horizon of three years or less than the fixed income fund investment, it might help you achieve your short-term goal like a hybrid fund.

2. Fixed income funds

It will help you build an emergency fund. Emergencies are always unplanned, that’s why they are emergencies, right? If you come across one such emergency in your life and you need a large amount of money to take care of the medical expenses, an emergency fund built using a fixed-income fund can help you with it. Fixed income funds allow you to withdraw or redeem the units at any point in time. And instant withdrawal means you can liquidate your fund at any point in time and use that money to handle a financial emergency with ease.

3. You can carry along a moderate to low risk profile

A fixed-income fund generally carries a moderate risk profile. This means those investors who were looking to shift from conservative investment avenues to mutual funds and who are not exactly ready to carry along a large risk appetite to invest in aggressive schemes can consider investing in a fixed income fund. This fund protects the capital and gives them interest rates that they can rely on irrespective of the market conditions.

4. It can be used for STP

A systematic transfer plan or STP allows an investor to transfer the money from a fixed-income fund to an equity fund. Meaning a better investment option that can make a lump sum investment. A fixed-income fund can be used for parking the lump sum investment money. So depending on market volatility, the fund house will gradually transfer the money from fixed-income funds to equity funds which means investors can use the fixed-income fund to park the money.

These are the four primary reasons for an investor to consider investing in a fixed-income fund.


You must understand fixed-income funds are not different from the mutual fund category. Their identity is defined by the investment style and the return that is expected. Some common fixed income generating products are exchange-traded funds, debt funds, and money market funds. The focus of a fixed income investment is too primarily direct towards safety, liquidity, and return. Not everybody who wants to start investing in the stock market is ready to handle a loss coming their way, but an investor is bound to risk as he is bound to benefit. But this is not the case when it comes to fixed income investing. Here your capital is secured, and you also earn interest over it. In my opinion, go for it.


Pravesh Kumar is associated with Informalnewz since last 5 years and head content department. He has done bcom in finance and loves writing.

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