Corporate Mutual Funds

Corporate mutual funds have evolved as an attractive investing option, allowing investors to build a debt portfolio with the highest-rated corporate bonds. These funds stand out as a unique alternative for people looking for a balanced and possibly profitable portfolio in an environment dominated by varied investment possibilities.

Get annual returns of 6% to 8%

Get annual returns of 6% to 8%

Invests in AA+ rated debt securities

Invests in AA+ rated debt securities

Professionally managed

Professionally managed

Regular flow of income

Regular flow of income

List of Corporate Mutual Funds Based on Last 3-Year Returns

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What Are Corporate Mutual Funds?

Corporate bond mutual funds are investments where at least 80% of the fund's assets are invested in the best-rated corporate bonds. These bonds are rated AA+ or above and therefore, they give assurance of payments to lenders and investors. 

Corporate bonds are debt instruments issued by private sector companies. These bonds collect funds from numerous investors with the promise to return the capital with interest after a given period. Each bond is given a credit rating by a credit rating agency based on the risk and creditworthiness of the issuing company.

Corporate debt mutual funds invest only in companies that have the highest credit ratings. Such ratings are given to companies with stable financial performance that have the lowest possibility of defaulting. That is why these debt funds carry low credit risk while providing higher returns than fixed deposits over the long term. 

 

Why Add Corporate Mutual Funds to Your Portfolio?

  • Low credit risks
  • Liquidity is high
  • Your fund is professionally managed
  • Investment in a diversified portfolio

Advantages of investing in Corporate Mutual Funds

There are a few advantages of investing in a corporate bond mutual fund. They are as follows.

  • Diversification

    Corporate mutual funds provide investors with a diverse portfolio of corporate bonds. Such diversification helps to disperse risk, which reduces the impact of a single asset's bad performance. These debt funds also do not have any average maturity requirements, meaning they can invest in bonds with different maturity periods.

  • Professional Management

    One of the primary benefits of corporate mutual funds is access to experienced fund managers. These seasoned experts use market trends, financial data, and economic indicators to make sound investment judgements. This expertise might be useful for investors who do not have the time or skills to actively manage their assets.

  • Liquidity

    Corporate mutual funds provide liquidity by allowing investors to purchase and sell shares on any business day at the fund's net asset value (NAV). This flexibility allows investors to easily access their funds. As corporate bonds are very frequently traded, these funds carry low liquidity risks, leading to better returns over time.

  • Risk Mitigation

    Corporate mutual funds strive to reduce investment risk by implementing thorough asset allocation and risk management procedures. Fund managers regularly monitor and alter the portfolio to reflect changing market circumstances. Corporate bond funds seek stability by investing in AA+ and AAA-rated bonds, which offer the highest degree of safety to investors.

  • Accessibility for Small Investors

    Corporate bond mutual funds allow small investors to have access to a debt portfolio that may contain assets that they could not purchase on their own. This democratisation of investing enables a greater range of people to engage in financial markets.

  • Transparency

    Corporate bond funds are subject to regulatory oversight, which promotes transparency and investor protection. Regulatory agencies provide standards and norms that fund managers must follow to promote fairness and avoid fraud. This regulatory structure improves the overall dependability of corporate mutual funds as investment vehicles.

Who Should Invest in Corporate Mutual Funds?

Before you start investing in corporate mutual funds, it is important to know which investors should choose these funds. They are as below:

  • Institutional Investors

    Corporate bond funds are appropriate for institutional investors including corporations, pension funds, and insurance organisations. These organisations frequently have significant cash to invest and can benefit from the diversification and competent management provided by corporate mutual funds.

  • Risk Diversification

    Investors looking for risk diversification might explore corporate mutual funds. These funds invest in a wide range of corporate securities, diversifying risk across industries and firms. This diversification reduces the impact of bad performance from a single investment.

  • Long-Term Investors

    Individuals or entities with a long-term investment horizon can find corporate mutual funds appealing. These funds typically invest in a mix of bonds with different maturity durations. This provides the potential for capital appreciation over time while also offering income through interest payments.

  • Income Generation

    Investors seeking consistent income sources may find corporate mutual funds appealing. These funds frequently invest in interest-bearing bonds, which offer better returns than traditional investments like fixed deposits. This might be especially appealing for retirees or other conservative investors looking for extra cash.

  • Active Management Advocates

    Investors who believe in active fund management and prefer professional fund managers to make decisions can look into corporate bond mutual funds. These funds use active portfolio management, in which fund managers modify holdings based on market circumstances and analysis.

  • Tax Efficiency

    Investors who are concerned about tax consequences may benefit from corporate mutual funds. These funds are designed to be tax-efficient for investors without taxable income. Capital gains from these funds are added to investors' tax slabs regardless of how long they stay invested. For those with lower income, this presents a lucrative investment option.

Points to Consider before Investing in Corporate Mutual Funds

There are a few points you need to consider before investing in corporate debt mutual funds. Some of them are as follows.

  • Risk Assessment

    Before investing in corporate mutual funds, consider the risk connected with the fund. Understand the fund's credit quality, volatility, and the nature of its underlying assets to determine its overall risks. Then, assess your own risk appetite.

  • Expense Ratios

    Examine the fund's expense ratios, which include management fees and other expenses. Lower cost ratios can lead to greater returns over time, so select funds with fees that match your investment objectives.

  • Fund Manager Track Record

    Investigate the fund manager's track record and skills. A talented and experienced management team may make a major difference in a fund's success. Look for consistent decision-making and a demonstrated ability to handle market situations.

  • Diversification Strategy

    Analyse the fund's diversification approach. A well-diversified portfolio can help reduce risk. Ensure that the fund is not unduly focused on a single area or industry to mitigate the effect of prospective downturns.

  • Liquidity of Assets

    Consider how liquid the fund's underlying assets are. High liquidity allows the fund to purchase and sell shares without significantly affecting the market price. This is especially important for investors who may need to access their assets immediately.

  • Performance in Various Market Conditions

    Examine how a fund has performed under various market scenarios, including bull and bear markets. A fund that exhibits consistent performance across a range of economic situations may be a good long-term investment.

Limitations of Corporate Mutual Funds

There are a few limitations of corporate mutual funds you must know before starting your investment journey. They are as follows.

  • Lack of Control

    Corporate mutual fund investors have little say over the fund's management and decision-making. Unlike individual stock investments, which allow investors to actively manage their portfolios, mutual fund investors have to rely on fund managers to make decisions on their behalf. This absence of direct control may cause frustration if the fund's performance does not meet individual preferences or expectations.

  • Fees and Expenses

    Corporate mutual funds frequently incur fees, which can reduce overall returns to investors. These funds charge an expense ratio to pay for management fees, administrative expenditures, and sales charges. Moreover, it may have an exit load upon redemption within a certain time. Investors must carefully assess the impact of these charges on their investment returns because they might dramatically diminish their net gains.

  • Diversification Challenges

    While mutual funds are intended to provide diversification by pooling resources and investing in a wide range of assets, certain corporate mutual funds may experience difficulties in reaching adequate diversity. Concentration in a single business or sector may expose investors to increased risk if that area faces problems. Investors should evaluate the fund's portfolio to ensure it is consistent with their risk tolerance and investment goals.

How to start investing in Corporate Mutual Funds with INDmoney?

After you have understood what Corporate Funds are, it is time for you to start your investment process with INDmoney. Below are some simple steps to follow to start your mutual fund's investment journey with us.

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).

  • Step 2

    Once your Free investment account is ready, you can either search for a Corporate Fund or go to the mutual fund section and tap on Corporate Funds inside Debt Funds Catalog.

  • Step 3

    Choose a Corporate Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, Expense ratios and underlying stocks and sectors.

  • Step 4

    You can choose to set up SIP in Corporate Funds or even invest as lumpSum. Once you are on the individual Corporate Fund page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan.

  • Step 5

    Choose the amount that you want to invest as SIP or LumpSum. 

  • Step 6

    Set up payments. If you choose to set up SIP in Corporate Funds,  you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

Should you Invest in a Corporate Mutual Funds?

Investing in a corporate mutual fund can be an enticing option if you are looking to get a regular income flow with moderate risk involved. With INDmoney, investing in these funds is very easy and you can select from its wide variety of features to choose the best corporate bond fund feasible for your investment portfolio.

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Frequently Asked Questions

Investments in corporate bond funds have clear benefits for those looking for a stable income with low risks. These mutual funds invest in corporate debt securities with the highest credit ratings, which ensures their returns are not affected even during a market downturn. These benefits make it ideal for risk-averse investors looking for better returns than bank deposits.

Corporate funds have some risks involved despite their alluring potential. They carry some credit risks, since it's possible for a large corporation to default, though the chances are very low. There is also high-interest rate risk in case market interest rates rise, reducing the value of the fund's portfolio. 

Individuals who have a longer investing horizon of five years or more and a moderate-risk appetite are better suited for corporate funds. They are suggested as a tactical addition to a portfolio, not as a main holding. Seeking advice from a financial adviser is a good idea as it lets you get tailored suggestions that match your risk tolerance and overall financial objectives.

Corporate  mutual funds are taxed in the following ways:

Capital Gains Tax: If you sell the investment within 3 years of investing, you must pay a tax at rates based on your income tax slab rate. In case you hold the investment for three years or more, your gains are called long-term capital gains (LTCG). These are taxed at a flat 20% rate. Note that from FY24, all returns from debt funds are taxed at an investor’s applicable tax slab rates.

Dividend Taxation: Dividends are added to the investor’s income and are taxed as per their applicable income tax slab.

Systematic Investment Plan (SIP) alternatives are available in certain corporate funds, although they are not as prevalent as they are in wider funds. SIP viability is influenced by several variables, including the size and liquidity of the fund. Before establishing a SIP, investors are recommended to get particular information from the fund company.

It is important to do a comprehensive analysis of the fund manager's track record, prospects, and the company's fundamentals. Other things to think about include comparing lower expenditure ratios is preferable and comprehending investing possibilities like dividend reinvestment. 

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