Here's a monthly update on the recommended corporate bond funds. The good news is that there will be no changes in the list this month. Corporate bond funds are among the favorites of both investors and mutual fund advisers alike. The corporate bond funds category has delivered an average return of 5.85% in the last year.
Another update: One of the recommended schemes, the Kotak Corporate Bond Fund, is in the third quartile for a period of 3 months. Mutual fund advisers believe that if you are looking for a three- to five-year medium-term debt mutual fund scheme and don't want to risk a lot with your investment, you might consider investing in corporate bond funds.
Mutual fund advisers says that corporate bond funds are less volatile than credit risk funds, long-term debt plans, and credit plans.
As per Sebi norms, corporate bond funds are mandated to invest at least 80% of their funds in top-rated corporate bonds. This means that these schemes will invest the majority of their funds in AAA rated corporate bonds. This is a huge plus under current market conditions, as there is no carrier for low-rated bonds. This investment mandate makes them relatively less risky than credit risk funds. However, since we are dealing with companies, there is always a small amount of risk involved.
Higher-rated companies are more reliable than their lower-rated counterparts. However, a higher rating does not mean that the company's ratings will not downgrade in the future or they may not default on their payment.
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