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Corporate Bond Mutual Funds
3 Year Average Returns
7.18%
Funds on Dhan
22
Corporate Bond Funds are a type of debt funds that invest mainly in Corporate Bonds with the highest credit ratings. These Funds lend money to companies and earn interest income from them. While these are the best Corporate Bond Mutual Funds to invest in, you must know these 3 things before you start investing.
- Goal: Corporate Bond Funds lend to companies by purchasing their bonds, aiming for higher returns than government securities.
- Investment Horizon: Ideal for investors looking for better returns than traditional savings, with a medium-term investment horizon of 3-5 years.
- Risk: These Funds carry a moderate risk, depending on the creditworthiness of the companies they lend to.
Best Corporate Bond Funds to Invest in 2026
Note: 3Y & 5Y returns are annualised. Rest everything is absolute.
Scheme | AUM (in Cr.) | Fund Age | 1W | 1M | 3M | 6M | 1Y | 3Y  | 5Y |
|---|---|---|---|---|---|---|---|---|---|
Compare | â‚ą 1,401 | 13 Yrs | 0.16% | 0.23% | 0.72% | 2.79% | 5.36% | 7.85% | 6.75% |
Compare | â‚ą 263 | 13 Yrs | 0.38% | 0.53% | 0.74% | 3.48% | 5.24% | 7.75% | 6.32% |
Compare | â‚ą 7,309 | 9 Yrs | 0.36% | 0.50% | 0.45% | 2.92% | 4.77% | 7.59% | 6.79% |
Compare | â‚ą 8,739 | 13 Yrs | 0.35% | 0.37% | 0.30% | 2.86% | 4.39% | 7.42% | 6.75% |
Compare | â‚ą 8,739 | 13 Yrs | 0.35% | 0.37% | 0.30% | 2.86% | 4.39% | 7.42% | 6.75% |
Compare | â‚ą 2,629 | 8 Yrs | 0.22% | 0.45% | 1.41% | 3.27% | 5.84% | 7.40% | 6.11% |
Compare | â‚ą 14,826 | 13 Yrs | 0.38% | 0.52% | 0.39% | 2.82% | 4.36% | 7.29% | 6.45% |
Compare | â‚ą 5,801 | 13 Yrs | 0.35% | 0.33% | 0.47% | 2.70% | 4.40% | 7.26% | 6.10% |
Compare | â‚ą 27,506 | 13 Yrs | 0.29% | 0.51% | 0.24% | 2.84% | 4.78% | 7.23% | 6.70% |
Compare | â‚ą 4,532 | 8 Yrs | 0.31% | 0.39% | 0.45% | 2.74% | 4.43% | 7.16% | 6.33% |
Compare | â‚ą 2,629 | 4 Yrs | 0.33% | 0.39% | 0.31% | 2.74% | 4.27% | 7.14% | 0.00% |
Compare | â‚ą 43 | 5 Yrs | 0.32% | 0.55% | 0.57% | 3.04% | 4.44% | 7.12% | 6.12% |
Compare | â‚ą 21,468 | 7 Yrs | 0.31% | 0.37% | 0.31% | 2.75% | 4.10% | 7.11% | 6.28% |
Compare | â‚ą 13,430 | 10 Yrs | 0.26% | 0.34% | 0.43% | 2.95% | 5.04% | 7.10% | 6.15% |
Compare | â‚ą 3,443 | 13 Yrs | 0.40% | 0.50% | -0.01% | 2.64% | 3.87% | 7.05% | 6.14% |
Compare | â‚ą 73 | 13 Yrs | 0.39% | 0.50% | 0.29% | 2.56% | 3.96% | 7.03% | 6.30% |
Compare | â‚ą 24,068 | 13 Yrs | 0.40% | 0.50% | -0.06% | 2.62% | 3.73% | 6.95% | 6.35% |
Compare | â‚ą 614 | 13 Yrs | 0.33% | 0.42% | 0.42% | 2.65% | 4.06% | 6.94% | 6.09% |
Compare | â‚ą 28,928 | 13 Yrs | 0.41% | 0.45% | -0.22% | 2.49% | 3.52% | 6.87% | 6.19% |
Compare | â‚ą 275 | 8 Yrs | 0.37% | 0.49% | 0.03% | 2.34% | 3.45% | 6.81% | 5.82% |
Compare | â‚ą 101 | 3 Yrs | 0.30% | 0.47% | 0.55% | 2.70% | 4.11% | 6.76% | 0.00% |
Compare | â‚ą 102 | 12 Yrs | 0.33% | 0.50% | 0.38% | 2.56% | 4.16% | 6.65% | 5.90% |
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Disclaimer: Mutual fund investments carry market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.
About Corporate Bond Funds
Corporate bond funds are a type of investment that primarily focuses on investing in corporate bonds issued by companies. These funds are suitable if you're seeking relatively stable returns with a risk profile higher than government bonds but lower than equities. Here's what you need to know:
- Corporate Bonds Focus: They invest in debt securities issued by corporations, offering higher returns than government securities due to higher risk.
- Risk and Return Profile: The risk is higher compared to government bonds but typically lower than equity investments, balancing the risk-return equation for moderate investors.
- Interest Income: These funds generally aim to generate income through interest earnings from corporate bonds.
Investing in corporate bond funds comes with several benefits, especially if you have a moderate risk profile and are looking for income generation:
- Higher Income Potential: Compared to government securities, corporate bonds typically offer higher interest income.
- Moderate Risk: They provide a balance between the higher risk of equities and the lower risk of government bonds.
- Diversification: Corporate bond funds can diversify your investment portfolio, particularly if it's heavily weighted in other asset classes.
- Liquidity: These funds generally offer better liquidity compared to holding individual bonds.
- Professional Management: Fund managers actively manage the portfolio, making informed decisions on credit risk and bond selection.
Determining if investing in Corporate Bond Funds is a good decision for you depends on your financial goals, risk profile, and investment horizon. These funds primarily invest in corporate bonds, which are debt instruments issued by companies. They offer a balance between risk and return, being less risky than equities but offering potentially higher returns than government bonds. Consider these aspects:
- Risk Tolerance:: If you are comfortable with moderate risk and are seeking higher returns than traditional savings options, Corporate Bond Funds can be suitable.
- Investment Horizon: They are typically more suitable for medium-term investment horizons, as bonds have fixed maturities and interest rates.
- Income Expectations: If you're looking for a steady income stream with a relatively lower risk compared to equities, these funds can align with your objectives.
Corporate Bond Funds can be suitable for a range of investors, each with specific investment needs:
- Moderate Risk Investors: Ideal for investors who are willing to take on a bit more risk than government securities for potentially higher returns.
- Medium-term Investment Goals: Suitable for those with investment goals spanning a few years, as these funds can offer stability and predictable returns.
- Regular Income Seekers: If you require a consistent income stream and are looking for alternatives to equity or lower-yielding savings options, these funds can be beneficial.
- Diversification Seekers: Investors looking to diversify their portfolio beyond equities and government bonds might find value in Corporate Bond Funds.
- Retirement Planning: They can also be a part of a retirement portfolio, providing regular income with moderate risk.
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FAQs
Corporate Bond Funds invest your money in bonds issued by corporations. These bonds are essentially loans given to companies, and in return, they agree to pay an interest at regular intervals plus the principal amount back at the bond's maturity. This type of fund aims to offer higher returns than government securities, with a moderate level of risk.
Corporate Bond Funds are primarily invested in high-quality corporate bonds. These are debt securities issued by private and public corporations to finance their operations, expansions, or projects. The focus is generally on bonds with high credit ratings (AA and above), indicating lower risk of default, aiming to provide stable interest income.
Corporate Bond Funds can generate profit through interest income from the bonds they invest in and through capital gains if the bonds are sold at a higher price than they were purchased. While they aim to provide more predictable income than stocks, the level of profit can vary based on interest rate movements and the creditworthiness of the issuing corporations.
No, Corporate Bond Funds are not tax-free. The interest income and capital gains from these funds are subject to tax. If you sell your investment within three years, the gains are taxed as per your income tax slab rate. If you hold the investment for more than three years, the gains are taxed at 20%.
Profits from Corporate Bond Funds are taxed depending on the duration of the investment. Short-term capital gains (if the investment is sold within three years) are taxed as per your income tax slab rates. Long-term capital gains (if the investment is held for more than three years) are taxed at 20% with indexation benefits.
When choosing the best Corporate Bond Fund, consider factors like the credit quality of the bonds in the fund, the fund's performance track record, expense ratio, and interest rate risk. Look for funds investing in high-grade bonds with a stable return history and lower expense ratios. It's also important to align the fund's investment strategy with your risk tolerance and investment goals.
No, opening a demat account is not necessary for investing in Corporate Bond Funds. You can invest directly through the mutual fund's website, through a financial advisor, or via online platforms that facilitate mutual fund investments. A demat account could be useful if you prefer to consolidate all your investments in one place, but it's not a requirement for mutual fund investments.
Choosing between lump-sum and SIP (Systematic Investment Plan) investments in Corporate Bond Funds depends on your financial situation and market outlook. A lump-sum investment may be suitable if you have a large sum of money ready to invest, especially during a period of high interest rates. SIPs are a good option for regular, disciplined investing, allowing you to average out the cost of your investments over time.
To start an Corporate Bond Fund SIP online, follow these 4 steps:
- Open Demat Account
- Choose the Corporate Bond Fund you wish to invest in.
- Choose the SIP option, specifying the amount and SIP date
- Set up an auto-pay via bank account to automate the SIP payments
Yes, you can sell or redeem your units in Corporate Bond Funds at any time. However, it's important to be aware of any exit load that might be applicable, which is a fee charged for redeeming your investment within a certain period from the date of investment. Exit loads are designed to discourage short-term withdrawals and can vary across different funds.
Corporate Bond Funds generally do not have a lock-in period, allowing you the flexibility to redeem your units as needed. However, to maximize benefits and minimize potential exit load charges, it's advisable to consider your investment horizon and the specific terms of the fund before investing.
While Corporate Bond Funds are considered to be on the safer side among debt funds, they carry risks such as interest rate risk, credit risk, and liquidity risk. Interest rate fluctuations can impact the value of the bonds in the fund's portfolio, credit risk pertains to the possibility of a bond issuer defaulting on payment, and liquidity risk involves the fund's ability to sell bonds quickly without affecting their price significantly.
Corporate Bond Funds are not 100% safe, just like any other investment. Although they invest in relatively safer corporate bonds with high credit ratings, they are still subject to market fluctuations, interest rate changes, and the credit risk of the issuing companies. They offer a balance of safety and returns but cannot be considered entirely risk-free.
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