DSP Mutual Fund Debt

Investment Objective of DSP Debt Mutual Funds

The DSP Debt Mutual Fund scheme's primary investment objective is to help investors generate mid-long-term capital appreciation. The investment objective is accomplished by creating a diversified investment portfolio by investing in equity and associated organisational securities. Additionally, the aim is to help investors save tax on the total income for the given financial year. The investors earn returns through income interest generated on the invested fund for the said period. Nevertheless, DSP Debt mutual fund must provide more certainty about achieving the investment objective. To achieve the investment objective, investors must make an informed decision by investing in the best DSP debt mutual fund scheme.

Risks Involved in DSP Debt Mutual Funds

DSP Debt Mutual Fund risk can be categorised as the default or credit risk and duration or interest rate risk. When the borrowers of debt investment instruments default on principal amount payments or associated interest payments, it leads to default or credit risks. On the other hand, duration or interest rate risks occur when there is market fluctuation. Debt instrument prices are inversely related to market interest rates, resulting in duration risks. Simply put, as soon as the interest rate increases, the price falls and vice versa. The longer the investment duration, the higher the risk factor.

Return Potential of DSP Debt Mutual Funds

The risk assessed by the investors makes the DSP Debt Mutual Fund returns. DSP MF debt funds have higher return potential than traditional fixed-income investment instruments. The historical data of DSP debt mutual funds reveals that in 23 years, the schemes have outperformed by providing an average of 7% to 10% returns. This data is hinged on the five-year investment horizon. Credit ratings of the fund also greatly impact the return extent. Funds with lower credit ratings may provide higher returns, high rates funds may provide relatively lower returns. Nevertheless, DSP debt mutual fund doesn't assure the investor about the accomplishment of the return objective as the fund performance might vary from one period to another.

Who Should Invest in DSP Debt Mutual Fund Schemes?

DSP Debt Mutual Fund schemes are significant for conservative investors seeking for below-depicted investment objectives:

• Short-term investment goals, like vacation, purchasing a car, etc.
• tax-adjusted investment returns
• Seek capital preservation

Additionally, retirees can invest in DSP debt mutual funds as it systematically provides tax-efficient cash flows. Investors looking forward to creating a diversified portfolio can also invest in DSP MF Debt Funds. Additionally, it eradicates the overall risk associated with the investment portfolio. Investors who wish to invest in stocks can count on SIP schemes and make lump-sum investments.

Things To Consider Before Investing in DSP Debt Mutual Fund 

Before starting an investment journey with DSP debt mutual funds, an investor should consider the following parameters:

• As an investor, measure the risk-to-reward ratio of the scheme. It will help determine the fund amount an investor should invest in the best DSP Debt Mutual Fund Scheme.  
• Essentially evaluate the fund expense ratio before parking your hard-earned money in the debt fund. 
• Investors must choose the best DSP debt mutual fund scheme that aligns perfectly with their investment objectives. 

Tax on DSP Debt Mutual Funds

DSP Debt Mutual Fund is taxable to the extent of redemption gains. When the investor holds the investments for less than three years, it falls into short-term gains. These gains would be taxable per the investor's income tax slab rate. If the investor holds the gains for more than three years, it will fall into long-term goals. These gains will be taxed at 20%.