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.
S&P and Moody are renowned credit rating agencies in the world. In India CRISIL and ICRA are famous. Take a look at the credit ratings given by CRISIL on it’s website. Here is the link.
ADVERTISEMENTS
Sathish Emmadi
Sathish Emmadi is a co-founder & editor at Lastbull.com. He is presently working in IT for one of the world’s top mutual fund companies. Handled multiple projects in BFSI (Banking,Financial Services and Insurance) domain. An Engineering Graduate from NITW.
Related posts:
Loading ...