5 Top Rated Debt Corporate Bond Funds Given Over 8% In 3 Years, Better Than FDs

We Indians have long preferred bank fixed deposits (FDs) as a debt investment alternative. But that is no longer the case. The popularity of FDs is declining as interest rates have fallen, particularly in the last year. However, in the last few weeks, the interest rates gained momentum but still lacks behind expectations. For investors searching for low-risk investing choices, corporate bonds might be a good alternative to bank FDs.

Corporate Bond

Corporate bonds, also known as non-convertible debentures, are financial securities issued by firms as a substitute for bank loans. The credit ratings offered by rating organizations can be used to assess the safety of company bonds. AAA-rated issuers are the safest and have the lowest credit risk compared to AA-rated issuers. When opposed to government bonds, corporate bonds offer greater yields to compensate investors for the credit risk.

Advantages of Investing in Corporate Bond Funds

Corporate Bond Funds have a higher level of safety than most other debt fund types since they are mandated to invest the majority of their assets in top-rated debt instruments. The fact that these funds rely heavily on top-rated papers improves their liquidity, allowing the fund manager to adjust the portfolio more effectively. Corporate Bond Funds have consistently outperformed other debt categories even amid the current financial market turmoil.
 Long-term capital gains tax of 20% with indexation is available if you invest in Corporate Bond Funds for more than three years. Because FD returns are taxed according to income tax slabs, corporate bonds are a useful alternative to FDs for investors in the highest tax band.

Corporate Bond Funds Rated by CRISIL

1. L&T Triple Ace Bond Fund - Direct Plan-Growth

Rated 5 stars by CRISIL

2. UTI Corporate Bond Fund - Direct Plan-Growth

Rated 3 stars by CRISIL

3. Sundaram Corporate Bond Fund - Direct Plan-Growth

Rated 2 stars by CRISIL

4. HDFC Corporate Bond Fund - Direct Plan-Growth

Rated 4 stars by CRISIL

5. Aditya Birla Sun Life Corporate Bond Fund - Direct Plan-Growth

Rated 1 star by CRISIL

Annualised Returns

All these 5 Corporate Bond Funds outperformed the respective category average returns. These funds also outperformed the annual category average returns. 

Mutual Fund	1-Year	2-Year	3-Year	5-Year	Since Inception
L&T Triple Ace Bond Fund - Direct Plan - Growth	6.42%	6.42%	9.83%	8.08%	8.08%
UTI Corporate Bond Fund - Direct Plan - Growth	4.91%	6.24%	8.59%		8.40%
Sundaram Corporate Bond Fund - Direct Plan Growth	4.91%	6.47%	8.56%	7.68%	7.93%
HDFC Corporate Bond Fund - Direct Plan - Growth	5.44%	6.98%	8.51%	7.82%	8.51%
Aditya Birla Sun Life Corporate Bond Fund - Direct Plan - Growth	5.26%	7.18%	8.32%	7.83%	8.59%

SIP- Absolute Returns

Mutual Fund	1-Year	2-Year	3-Year	5-Year
L&T Triple Ace Bond Fund - Direct Plan - Growth	2.37%	5.27%	11.10%	22.76%
UTI Corporate Bond Fund - Direct Plan - Growth	2.10%	5.14%	10.34%
Sundaram Corporate Bond Fund - Direct Plan Growth	2.04%	5.14%	10.29%	20.67%
HDFC Corporate Bond Fund - Direct Plan - Growth	2.24%	5.58%	10.77%	21.31%
Aditya Birla Sun Life Corporate Bond Fund - Direct Plan - Growth	2.16%	5.58%	10.76%	21.20%

Disclaimer

Mutual fund investments are subject to market risk. Read all scheme-related documents, and Terms and Conditions carefully before investing. The above-mentioned information is purely informational and doesn't guarantee any return. The Greynium Information Technologies and the Author are not liable for any losses caused as a result of a decision based on the article.