These schemes invest at least 80% of their capital in securities of the best-rated companies, making them relatively safer than other debt schemes such as credit risk They are also safer than government bond funds and long-term debt funds, which are highly sensitive to changes in interest rates in the economy.
Two factors need to be kept in mind: safety and interest rates. Safety became a crucial factor for debt fund investors after a series of defaults and rating downgrades in the debt sector nearly three years ago. The closure of six schemes by Franklin Templeton Mutual Fund shook conservative investors in debt schemes. Though the environment is different now, caution needs to be exercised.
The second factor, interest rate changes, is becoming more important in the current environment. Central banks are operating very cautiously as the inflationary backdrop remains persistent, and they have been warning investors that a rate cut may take time. In India, the Reserve Bank of India has also kept interest rates at their levels and has not decided on rate cuts.
Don’t think that corporate bond funds are risk-free. Of course, the highest rating, AAA, offers you greater security, but make sure that your fund manager is not taking on any additional risk to earn extra returns.
Here are our recommended corporate bond funds that you can consider investing in to take care of your short-term investments. There is no change in the list of recommendations this month. If you are investing in these schemes, you can relax and continue with your investments. Follow our monthly updates regularly.The best corporate bond funds to invest in in August 2024:
Methodology:
ETM Mutual Funds has used the following parameters to select the debt mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.
2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.
i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.
ii)When H < 0.5, the series is said to have mean reversion.
iii) When H > 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.
3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days needed to calculate the relationship
Downside risk = square root of Z
4. Superior performance: Fund performance: benchmark performance. Daily cumulative returns are used to calculate the fund and benchmark performance and subsequently the fund’s active performance.
Asset size: For debt funds, the limit asset size is Rs 50 crore.
(Disclaimer: Past performance is no guarantee of future performance.)
Disclaimer:
The information contained in this post is for general information purposes only. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the website or the information, products, services, or related graphics contained on the post for any purpose.
We respect the intellectual property rights of content creators. If you are the owner of any material featured on our website and have concerns about its use, please contact us. We are committed to addressing any copyright issues promptly and will remove any material within 2 days of receiving a request from the rightful owner.