Stop Letting Your Cash Nap: A Guide to Debt Funds

We've all been in that situation—keeping a bunch of money in a savings account because we think we might need it "soon," only to see it sit there doing nothing for months. While a regular savings account is safe and gives you peace of mind, the interest it earns is usually so small that it doesn't even cover the cost of a cup of coffee, let alone keep up with rising prices.

If you're looking for a way to make that money work better without facing the ups and downs of the stock market, Debt Funds could be the smart choice for you.

What Exactly Are Debt Funds?

Imagine a debt fund as a way to act like a bank. Instead of buying shares in a company (which is called equity), you are giving your money to organizations like the government, banks, or big companies. In return, they give you interest on your money.

The benefit: These funds are usually less risky than equity funds and can give you better returns than a regular savings account.

Strategies for Different "Idle" Scenarios

Not all idle cash is created equal. The trick is matching your timeline to the right type of fund.

If your money is idle for...	Best Debt Fund Type	Why?
A few days to a week	Liquid Funds	High liquidity; usually processed within 24 hours.
1 to 3 months	Ultra Short-Term Funds	Slightly better yields than liquid funds with low risk.
6 months to 1 year	Money Market Funds	Invests in high-quality, short-term instruments.
1 to 3 years	Short-Term / Corporate Bond Funds	Ideal for "parking" money intended for a future goal (like a house down payment).

Export to Sheets

How to Generate Consistent Income

If your aim is not just to grow your money, but to get a regular flow of cash, here are two smart strategies:

1.     The Systematic Withdrawal Plan (SWP)

Instead of waiting for your investment to give you money all at once, you can set up an SWP.

This plan automatically takes out a fixed amount of your choice every month. It's like setting up your own "income" from your investments.

2.     Taking Advantage of the Yield

Unlike fixed deposits (FDs), debt funds can be more tax-friendly if you earn a lot, especially if you keep them for a long time.

However, tax rules can change depending on where you live, so make sure to check the latest 2026 regulations in your area.

A Quick Word of Caution

While debt funds are "safer" than stocks, they aren't "risk-free." Keep an eye on two things:

• Credit Risk: The chance that the borrower might not pay back the loan.

• Interest Rate Risk: When market interest rates go up, the value of existing bonds (and debt funds) can dip slightly.

Pro Tip: Stick to "AAA" rated funds or Banking & PSU funds if you want to prioritize safety over aggressive returns.

The Bottom Line

Idle money is a missed opportunity. By shifting your surplus from a 3% savings account to a well-chosen debt fund, you’re turning a stagnant pile of cash into an active income generator.

At Ascentia we suggest you how you can manage your funds in a way that it gives out maximum returns amid volatility in the market as well as to earn from the idle lying funds. We provide solutions for all kinds of investment problems that an investor might face. To get our services you can contact us from clicking on the link on the top right corner.

Debt funds keeping your money working always