According to debt mutual fund managers, the RBI may pause or stop hiking rates in 2023. This means it is better to return to debt mutual fund investors. Against this backdrop, are you considering pursuing relatively safe plans to take care of your short-term needs? If you are looking for ‘relatively safe’ debt funds to invest in for three years or more, you can consider investing in corporate bond funds.
These schemes are mandated to invest at least 80% of their corpus in highly rated companies. This makes them relatively safer than other debt schemes such as credit risk funds. They are also safer than bond funds and long-term debt funds, which are more sensitive to interest rate changes in the economy.
You should pay attention to these two factors: security and interest rates. After a series of defaults and downturns in the debt space nearly three years ago, it became a critical factor in the safety of debt fund investors. The closing of six schemes by Franklin Templeton Mutual Fund has shaken conservative investors in debt schemes. Although the environment is much better now, you still have to be very careful.
Second, interest rate changes are important in the current period. Central banks around the world have been on a policy tightening process. Now, they may stop hiking rates or start lowering rates in the coming months. This can lead to better returns than debt funds.
Don’t think that corporate bond funds have no risk. In fact, the highest AAA rating gives you maximum security. But be sure that your fund manager is not taking any extra risk to make extra returns.
Best Corporate Bond Funds to Invest in 2023:
ETMuualFunds has used the following parameters to list debt mutual fund schemes.
Average returnsHe had rolled every day for the past three years.
Consistency Over the past three years: Hurst Exponent, H is used to calculate the consistency of a fund. The H exponent is a measure of the randomness of the fund’s NAV series. Funds with high H show lower volatility compared to funds with low H.
i) H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to predict.
iii) When H > 0.5, it is called continuous persistence. The larger the value of H, the stronger the trend of the series.
Low riskFor this measure, we have considered only negative responses to mutual fund schemes.
X = returns below zero
Y = sum of all squares of X
It is taken to calculate the ratio Z = Y/number of days
Low risk = square root of Z
ExcellenceCash return – Benchmark return. A daily rollup is used to calculate the fund’s return and benchmark and then the fund’s active return.
Asset size: For debt funds, the initial asset size is Rs 50
(Disclaimer: Past performance is no guarantee of future performance.)