Purpose of Corporate Bond Debt Funds

1. Functionality: Corporate bond mutual funds function on the stock market in the same way as other mutual funds.

2. Impact of NAV: Profits are realised when the NAV of a mutual fund increases due to an increase in the value of a corporate bond in the portfolio of the fund. A decrease in NAV value has the opposite impact on the mutual fund’s aggregate value.

3. Raise Capital: Corporate bond debt funds are used by businesses to raise capital. An investor and a company borrow money from one another through bonds. The investor agrees to loan money to the firm for a set length of time. In exchange, the investor receives monthly interest payments. The corporation repays the investor when the bond reaches maturity.

Corporate Bond Debt Funds – Meaning, Features & Suitability

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What are Corporate Bond Debt Funds?

Corporate Bond Debt Funds are defined as mutual funds that primarily invest in debt instruments, such as corporate bonds. Corporate Bonds are the debt instruments that businesses issue in order to raise funds from investors and/or the public, to fund their short-term expenditures such as working capital, advertising, insurance premium payments, etc. Corporate bonds provide a series of fixed-interest payments against the principal amount. Corporate bond funds are becoming a popular debt instrument for firms to generate the required funds since the charges are cheaper than bank loans....

Features of Corporate Bond Debt Funds

1. Investment Allocation: These mutual funds primarily invest in corporate debt instruments. Bonds, commercial papers, debentures, and structured obligations are examples of these funds. Each of them may have a different maturity period and risk profile. When there are no feasible opportunities for high-quality corporate debt, corporate bond funds invest a small proportion in government securities. They can also invest in sovereign fixed-income securities....

Purpose of Corporate Bond Debt Funds

1. Functionality: Corporate bond mutual funds function on the stock market in the same way as other mutual funds....

Who Should Invest in Corporate Bond Debt Funds?

Investors who should invest in Corporate Bond Debt Funds are looking for the following points :...

Factors to Consider Before Investing in Corporate Bond Debt Funds

1. Returns Expectation: To get an overview of a corporate bond fund’s predicted returns, look at its previous performance. However, keep in mind that this is not a guarantee of future profits, and many corporations have defaulted in the past....

Advantages of Corporate Bond Debt Funds

1. Higher Returns than Government Bonds: Corporate bonds often provide higher returns than government bonds. However, corporate bonds carry slightly more risk than government bonds or other forms of bonds. Surprisingly, even if interest rates fall, you can still exchange bonds from respectable firms....

Disadvantages of Corporate Bond Debt Funds

1. Capital Stagnation: Corporate bonds do not deliver considerable capital growth because the investment is not intended to increase in value throughout the life of the bond. While you are entitled to timely interest payments if the firm does not default on them and will receive your initial investment back in full plus interest at the maturity date, there will be no significant growth in capital even if you sell before maturity at the secondary market....