India Today

DEBT FUND RISKS

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➘ INTEREST RATE

They are not static, and can rise and fall. Also, interest rate and portfolio values (NAV) move in opposite directions, which means when interest rates fall, NAVs go up and vice versa

➘ CREDIT RISK

This is about the bond issuer not returning the coupon income and/ or maturity proceeds on the specified dates as mentioned in the bond. No such risk in funds that invest in government securities

➘ LIQUIDITY RISK

This happens if the bond is not tradable at fair value or faces major redemption in adverse market conditions

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