Which corporate bond fund

Investors should choose only those mutual funds that are in sync with their risk profile. This article gives information about corporate bond funds — a category of debt fund schemes. Organisations or firms need capital for their daily operations as well as future expansions and growth opportunities.

To achieve this, companies have two ways — debt and equity instruments. Hence, most companies prefer issuing debt instruments to raise capital for their operation. Depending on their needs, bank loans can be expensive for corporations. This is where bonds or debentures provide companies with an economical alternative to raise funds.

Corporate bond securities are the underlying portfolios of credit opportunities for debt funds. When you purchase a bond, the company is borrowing money from you. The firm will repay the principal after the maturity period as mentioned on the agreement.

In the meantime, you will receive the interest fixed income — known as the coupon. Generally, coupon payments in India are made twice a year. Corporate bonds are an excellent choice for investors looking for a fixed but higher income from a safe option. Corporate bonds are a low-risk investment vehicle when compared to debt funds as it ensures capital protection. However, these bonds are not entirely safe. If you opt for corporate bond funds that invest in high-quality debt instruments, then it can serve your financial goals better.

Long-term debt funds often tend to become riskier when interest rates fluctuate beyond expectations. As a result, corporate bond funds invest in scrips to combat volatility.

They usually go for an investment horizon of one year to four years. This can be an added benefit if you remain invested for up to three years. It can also prove to be more tax-efficient if you fall in the highest income tax slab. Corporate bond funds invest predominantly in debt papers. Companies issue debt papers, which include bonds, debentures, commercial papers, and structured obligations. All of these components carry a unique risk profile, and the maturity date also varies.

Every bond has a price, and it is dynamic. You can buy the same bond at different prices, based on the time you choose to buy. Investors should check how it varies from the par value — it will give information about the market movement. This is the amount the company bond issuer pays you when the bond matures. It is the loan principal. When you buy a bond, the company will payout interest regularly until you exit the corporate bond or the bond matures. This interest is called the coupon, which is a certain percentage of the par value.

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Top Tax Saving Schemes. Highest Risk Adjusted Return. Lowest Expense Ratio. New Fund Offers. Rate Story. Font Size Abc Small. Abc Medium. Abc Large. Here's a monthly update on our recommended corporate bond funds in October.

The good news is that there is no change in the list this month. Corporate bond funds are among the favorites of mutual fund investors and advisors alike. Corporate bond funds category has offered 4. Another update- one of recommended scheme, Kotak Corporate Bond Fund, lies in the 3rd quartile for 5 months. If you are invested in this scheme, continue to hold your investment. We will update you about its performance regularly.

Mutual fund advisors believe that if you are looking for a debt mutual fund scheme to invest for a medium term of three to five years and don't want to take too much risk on your investment, you may think of investing in corporate bond funds.

Corporate bond funds are less volatile than credit-risk funds, long-term debt schemes and gilt schemes, say mutual fund advisors. Nav as on 10 Nov Things You should consider Annualized Return. ETPrime stories of the day Logistics How sustainable supply chains helped companies stay afloat in the pandemic. Subscribe to ETPrime. Browse Companies:. Find this comment offensive? This will alert our moderators to take action Name Reason for reporting: Foul language Slanderous Inciting hatred against a certain community Others.