|Credit Risk Fund||Corporate Bond Fund|
|Credit Risk funds hold more than 65% of their assets in low rated debt. More specifically debt rated below AA+.||Corporate bond funds must invest at least 80 per cent of their corpus in the “highest-rated “corporate bonds. Hence, maximum corpus is invested in AAA or AAA+.|
low credit rated debt instruments (below AA) ensures better returns.
|This debt mutual funds scheme is ideal for risk averse investors wanting to invest for three to five years.|
|As the name suggests they are high-risk.||less risky than credit risk funds|
Credit risk fund managers may invest in the AA instrument over AAA ones. However minimum 65% of the corpus has to be in AA rated (or lower) paper. In case a AA rated paper is upgraded to AAA then the fund manager may have to sell debt paper (at a profit) to rebalance and maintain the prescribed SEBI limit of minimum 65% in “AA or lower” rated instruments.
|Minimum 80% of the corpus is invested in AAA rated paper. However, in case of ratings downgrade, the fund manager will have to sell at a loss and rebalance the portfolio. IL&FS saga is a clear example of how a AAA rated paper was downgraded.|
|Good for investors who have a little bit of risk appetite.||This is closer to an FD. Hence FD investors can invest here and get better returns along with tax benefits (for holding over 3 years).|
|These funds generate approx. 9-9.5% returns.||
Corporate bond category has generated around 6.09% in the last one year, 7.165 (CAGR) in the last three years and 7.86% (CAGR) in the last five years.