It’s easy to understand where equity funds invest and how they generate returns. They buy and sell equity shares. When share prices go up, equity funds generally tend to gain.
But debt markets work differently. To put it simply, it’s a market place for borrowers to borrow money and lenders who are willing to lend. Timely payment of interest and principal is crucial. And because retail investors usually cannot buy them directly (face value of one bond is typically around Rs 1 lakh), there is little understanding on how such debt instruments work.
