What are corporate debt mutual funds?
Debt mutual fund mostly invest in corporate debt instruments (NCD, etc) with various maturity periods depending upon the type of mutual fund. e.g. a short term fund will invest in debt instruments of short duration (1-3 years) and ultra short term fund will invest in debt instruments of 3-6 months.
What are Gilt funds?
Gilt fund invest of Government of India Bonds of various maturity. There are fixed maturity and regular Gilt funds. These fund have lower return than corporate debt funds and also carry interest rate risk. Some examples:
- ICICI Prudential Constant Maturity Gilt Fund – Growth
- SBI Magnum Gilt Fund – Growth
Which one is better?
Lately we saw few corporates having problem in paying back the debt which can hurt returns by Corporate mutual fund. A redemption pressure can also cause fund house to lock your money if they cannot find buyers for the debt instruments. So investors can do these:
- Keep a good portion Gilt funds which have virtual no credit risk and are highest rated.
- Keep any corporate debt fund investment in multiple funds of various AMCs (Asset management companies). e.g. Nippon India Mutual Fund, SBI Mutual Fund, etc.