Debt funds are mutual funds that invest in fixed-income instruments—government securities, corporate bonds, treasury bills, and similar. They offer relatively stable returns with lower volatility than equity funds.

Role in FIRE

Debt funds provide stability and income in a FIRE portfolio. They’re used for:

• Asset allocation — The fixed-income portion of your asset allocation
• Withdrawal phase — A source for SWP or lump-sum withdrawals when equity markets are down
• Emergency fund — Liquid funds for short-term needs

In India, many also use PPF, EPF, and NPS for the debt portion. Debt funds offer more liquidity than PPF and can be useful for the years between early retirement and when NPS/EPF become accessible.