Below are discussed certain factors that investors must consider before investing in a corporate bond fund.
Investment Horizon
Corporate bond funds usually invest in corporate debentures and bonds having medium-to-long terms. Hence, investors must determine their investment horizon by prioritising their future goals. If investors have a long-term investment horizon, then this type of investment instrument can prove beneficial to them.
Knowledge of Market Condition
All kinds of investments come with a risk factor, so it makes the corporate bond fund investment. Corporate bonds have higher credit risk than other investments. Here, investors need to have some knowledge regarding market risks and challenges to make smart and profitable investment decisions.
Past Performance of Corporate Bond Funds
Evaluating the past performance of any investment is important before taking any decision. Past performance of investment helps investors get an idea about possible and usually similar returns given in a stable market condition. However, investors must note that past performance is only indicative. A large number of defaults in a portfolio can negatively impact returns. Hence, investors should not ideally depend only on past performance while investing in corporate bond funds.
Rating of Bonds
A corporate bond fund can acquire a crucial position in a core debt fund portfolio. The possibility of stable returns, indexation benefits in taxation, and restricted downgrade risk can benefit investors having a long term investment horizon.
Therefore, consult with a financial advisor, determine your investment horizon, decide on investment goals, and assess risk appetite before investing in a Corporate bond fund to ensure assured returns.
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