Debt Funds Explained: Who Should Invest & How Much Debt Should Be In Your Portfolio?

Debt funds can provide stability to a portfolio and help reduce the impact of market volatility. Shweta Rajani, Mutual Fund Head, Anand Rathi Wealth, says investors should first consider their return objective, investment horizon and liquidity needs before deciding their equity-debt allocation. Investors with a longer horizon and higher risk tolerance may consider a larger equity allocation, while debt can provide stability and balance. For investors with a 10–15 year horizon, an equity allocation of around 60–80% could be considered, with the remaining portion in debt, depending on individual circumstances. Debt allocation may generally range from 20–40%, but the right mix depends on each investor’s goals, risk tolerance and financial needs.