Increasing Demand for corporate bond funds in India 5 Reasons

Increasing Demand for corporate bond funds in India: 5 Reasons

High liquidity with optimal returns seems to be one of the most important criteria for investors looking for new investment options in India. This has made corporate bond funds a widely popular choice. Read this post to know five reasons why corporate bond funds are increasingly becoming popular in India among investors.

While there is no shortage of investment options in India, an increasing number of new investors are now looking for investments that offer decent income with high liquidity. This has made corporate bond funds a widely popular choice. These funds invest in high-quality money market and debt instruments, making them an excellent choice for investors wanting to earn optimal returns over a short-term horizon.

But while mutual fund schemes like equity, debt, ELSS, and balanced funds are a go-to option for most investors, several reasons make corporate bond funds an excellent addition too. Here are five reasons for the increasing demand for Corporate Bond Funds among Indian investors.

  1. Optimal Returns

One of the biggest reasons for the growing popularity of corporate bond funds is the strong returns they offer. With the returns on government bond funds falling consistently in the past few years, corporate bond funds still continue to provide optimal returns.

Prefer funds that only invest in AA+ rated and above bonds, and you stand a chance to earn healthy returns on your short-term investments.

  1. High Liquidity

While the portfolio holdings of a corporate bond fund have their maturity, investors can easily redeem the units before the maturity as well. Many of the AMCs do not have any entry or exit load for these funds, allowing investors to withdraw their investment any time.

While most investors generally invest in these funds for three months to two years, you can easily withdraw your money any time even before the completion of this investment tenure.

  1. Portfolio Diversification

If you are aiming to create a well-diversified portfolio, you’d surely want to invest money in debt instruments. Apart from standard debt, liquid, and income funds, corporate bond funds too could be an excellent addition for your debt portfolio.

Their shorter investment tenure and high liquidity make them an ideal option for creating a diversified portfolio.

  1. Lower Risk Than Equity Funds

As compared to equity funds, corporate bond funds are generally known to be less risky. While they are certainly riskier than government bond funds, they are still an excellent choice for a risk-averse investor.

Fund houses reduce the risk further by only investing in high rated bonds to ensure that the investors receive optimal returns with minimal risk.

  1. SIP Flexibility

Most of the corporate bond funds in India also offer SIP flexibility. If you do not have a lump sum amount to invest in the fund, you can also take the SIP route and start investing with just Rs. 1,000 per month.

Moreover, some of the AMCs also offer features like STP (Systematic Transfer Plan), SWP (Systematic Withdrawal Plan), and SWF (Smart Withdrawal Facility) for enhanced convenience.

Make Corporate Bond Funds Part of Your Portfolio

Corporate bond funds are one of the safest and most rewarding debt funds for investors with a shorter investment horizon. Just make sure that you select a fund with high rated bonds from a reputed AMC to experience all the valuable advantages discussed above.

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