Debt funds are considered safer than equity funds
and hybrid funds. The fact that the underlying assets generate fixed interest makes these funds ideal for receiving a regular income. As compared to traditional investment avenues like bank FDs, debt funds have the potential to generate higher risk-adjusted returns. However, one point must be noted, - the fund NAV may change due to the movement of interest rates in the economy. A rise/fall in the interest rates causes the bond prices to go down/up thereby pulling the fund NAV down/up.
Within debt funds, GILT Funds may provide long term wealth accumulation at a relatively higher risk. Besides this, Dynamic Bond Funds are an all-season investment option to grow wealth by taking advantage of interest rate movements.