- Date : 09/09/2022
- Read: 3 mins
The schemes listed below have proven to be successful in the past months and have the best return rates
Rates are soon to be hiked by RBI to manage the inflationary pressure on our economy, as predicted by money market experts. Debt mutual funds, especially long-term funds, are negatively impacted by a rising rate scenario. As a consequence, debt fund investors prefer to utilise relatively more reliable schemes to fulfil their short-term needs. If you would like ‘relatively more reliable’ debt funds to invest in for a short time, corporate bond funds are a great option to consider. It is easy to calculate the return as well.
Sharp hikes in interest rates spell disaster for debt funds, especially those for long term, because the relationship between yields and prices of bonds is inversely proportional. When interest rates rise, NAVs of debt funds fall at the same rate. In the following months, RBI is expected to raise policy rates. This has caused a lot of alarm amongst investors.
Returning to corporate bond funds, such schemes are instructed to invest at least 80% of their entirety in the companies with the highest standards. There are advantages and disadvantages of the bond fund as they come. This is what provides relative safety in these schemes as compared to other similar schemes such as credit risk funds. They are also more reliable than long term debt funds and gilt funds that are acutely affected by changes in market interest rates.
The most important factors to be considered are the following: safety and interest rates. Nearly three years ago, there was a devastating sequence of defaults and downgrades in the debt space. Since then, safety has become a critical factor for debt fund investors. When Franklin Templeton Mutual Fund shut down six schemes abruptly, it left traditional investors shaken in debt schemes. Thus, even though the environment is stable now, caution is still advised.
Also Read: 7 Quant based equity mutual funds in India to invest
Secondly, interest rate changes are of immense importance in the current day and time. Worldwide, policies are being tightened by central banks. Soon, there will be a reversal of the easy money policy prevalent in current times. Similarly, in India, a hike in policy rates is terrible for debt funds. That’s why you should always be careful while dealing with investment market policies.
However, it is important to keep in mind that all investments pose their own risks. The same is the case with corporate bond mutual funds. Of course, the higher the AAA rating, the higher is the safety afforded to you. But it is essential to ensure that your fund manager is not taking unnecessary risk in hopes of a higher return rate. Also, do not panic. Investments should only be made if you can afford to invest in the whole investment cycle.
Also read: Performance of Gold as an investment in 2022. Should investors buy more or sell gold?
The schemes listed below have proven to be successful in the past months and are more likely to have the best return rates. It is advised that you follow these schemes closely for monthly updates if you are interested in investing.
Best corporate bond funds to invest in 2022:
- Aditya Birla Sun Life Corporate Bond Fund
- Sundaram Corporate Bond Fund
- HDFC Corporate Bond Fund
- ICICI Prudential Corporate Bond Fund
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
Rates are soon to be hiked by RBI to manage the inflationary pressure on our economy, as predicted by money market experts. Debt mutual funds, especially long-term funds, are negatively impacted by a rising rate scenario. As a consequence, debt fund investors prefer to utilise relatively more reliable schemes to fulfil their short-term needs. If you would like ‘relatively more reliable’ debt funds to invest in for a short time, corporate bond funds are a great option to consider. It is easy to calculate the return as well.
Sharp hikes in interest rates spell disaster for debt funds, especially those for long term, because the relationship between yields and prices of bonds is inversely proportional. When interest rates rise, NAVs of debt funds fall at the same rate. In the following months, RBI is expected to raise policy rates. This has caused a lot of alarm amongst investors.
Returning to corporate bond funds, such schemes are instructed to invest at least 80% of their entirety in the companies with the highest standards. There are advantages and disadvantages of the bond fund as they come. This is what provides relative safety in these schemes as compared to other similar schemes such as credit risk funds. They are also more reliable than long term debt funds and gilt funds that are acutely affected by changes in market interest rates.
The most important factors to be considered are the following: safety and interest rates. Nearly three years ago, there was a devastating sequence of defaults and downgrades in the debt space. Since then, safety has become a critical factor for debt fund investors. When Franklin Templeton Mutual Fund shut down six schemes abruptly, it left traditional investors shaken in debt schemes. Thus, even though the environment is stable now, caution is still advised.
Also Read: 7 Quant based equity mutual funds in India to invest
Secondly, interest rate changes are of immense importance in the current day and time. Worldwide, policies are being tightened by central banks. Soon, there will be a reversal of the easy money policy prevalent in current times. Similarly, in India, a hike in policy rates is terrible for debt funds. That’s why you should always be careful while dealing with investment market policies.
However, it is important to keep in mind that all investments pose their own risks. The same is the case with corporate bond mutual funds. Of course, the higher the AAA rating, the higher is the safety afforded to you. But it is essential to ensure that your fund manager is not taking unnecessary risk in hopes of a higher return rate. Also, do not panic. Investments should only be made if you can afford to invest in the whole investment cycle.
Also read: Performance of Gold as an investment in 2022. Should investors buy more or sell gold?
The schemes listed below have proven to be successful in the past months and are more likely to have the best return rates. It is advised that you follow these schemes closely for monthly updates if you are interested in investing.
Best corporate bond funds to invest in 2022:
- Aditya Birla Sun Life Corporate Bond Fund
- Sundaram Corporate Bond Fund
- HDFC Corporate Bond Fund
- ICICI Prudential Corporate Bond Fund
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.
