Bond Funds or Debt Funds

Bond Funds invest in debt instruments issued by governments, Corporates and other financial institutions. The main objective of bond funds is to have low risk exposure and get steady income.

The risks associated with bond funds are interest rate fluctuations, fiscal and monetary policies of the Government. Debt instruments are a better source of predictable return. In this case too, the investment in different bonds can be tailored to suit different investment objectives.

In a bond fund’s fact sheet an investor should carefully look at ‘Credit Rating breakdown’ i.e. the percentages of investment of the fund across bonds of companies of different credit ratings. If this breakdown is not available you can take a look at the holdings of the debt fund and get the credit rating of the issuer of the bond from a credit rating agency website. Read more

September 6, 2009 | Filed Under Mutual Funds | Leave a Comment

Equity Funds – Equity Mutual funds

Equity funds basically invest in equity shares of companies. They can invest either through IPO or through secondary market route. They can also invest in unlisted companies i.e. Private Equity subjected to a cap and rules by SEBI. Funds buy stakes in unlisted companies usually at very low prices to maximize their returns whenever these companies go public (If the IPO is a success share price on listing day goes high thereby the fund companies which have shares in the company get benefited).

Equity funds are generally considered the riskiest among mutual funds by virtue of the risks associated with equity. Within equity funds investment can be done to suit different risk appetites, investment objectives and strategies adopted by the fund.

Investors of these funds need to know the different risks associated with equity funds. Some fund management companies provide the market cap data of the fund’s investments. This gives an idea on the risk taken by the fund manager. Market cap data of a fund is the percentage of investment by the fund across different market capitalization companies. Read more