New Delhi, June 15 -- Debt funds invest primarily in fixed-income securities such as government securities, treasury bills, corporate bonds, debentures, and commercial papers, depending on the specific fund's investment mandate. Hence, the returns generated by these funds depend largely on the performance of the underlying debt securities and movements in interest rates.

While many investors focus only on past returns, it is equally important to assess a debt fund's risk profile and sensitivity to interest rate movements. Such three key metrics are average maturity, macaulay duration, and modified duration.

Average maturity shows when the fund's underlying bonds are expected to mature, macaulay duration indicates how long it takes to re...