Credit opportunities funds & corporate bond funds adopt accrual strategy and aims to generate better returns by investing in lower rated securities. A credit opportunities fund invests in debt securities across the credit rating spectrum.\nFind latest return report of Accrual Funds till October 2016 with portfolio Indicators created by FundzBazar teams based on expert analysis. \n
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Accrual fund typically invests in short to medium maturity papers of medium to low quality.
The objective of the scheme is to earn interest income in terms of coupon offered by bonds. It adopts buy and hold strategy and aims to generate better returns compared to bank FDs by taking credit risk & investing in lower rated securities for the sake of generating higher yield
Corporate Bond fund
accrual strategy and aims to generate better returns by investing in
lower rated securities.
of generating higher yield. They are not concerned about the interest
rating spectrum. Simply put, these funds look for an opportunity for
a possible credit upgrade; like investing in an AA rated scrip that has
the potential to get upgraded to a AAA rating.
low-rated securities. These schemes invest in a mix of corporate
bonds that are highly rated as well as those that carry a moderate (if
not lower) credit rating.
company's fundamentals have improved but the credit rating has
corporate bond funds are moderate risk, moderate return products
Indexation is the process that inflates the purchase price of the asset to take into account the impact of inflation considering the time of purchase & sell
Every year government declares Cost Inflation Index (CII) which is used to measure the rate of inflation in the economy
Let’s look at an example
Bought Debt Fund in the year 2013-14 (CII = 939) for Rs 10 lakh.
Sold Debt Fund in the year 2016-17 (CII = 1125) for Rs 12.95 lakh.
Indexed cost is calculated as – Cost of purchase * CII of the year of sell / CII of the year of purchase 1000000*1125/939, which comes to 11,98,083.07
Long Term Tax liability will be Rs.96916.93 (Rs.1295000 – Rs.1198083.07)
appreciation over the long-term
fixed income markets
yield compared to plain vanilla diversified debt schemes
do well; leads to improvement in credit ratings
indexation on capital appreciation