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Credit-risk funds deliver 8.97% 3-year returns, highest among debt funds. Should you invest? Experts flag key risks
Mint 1 hr ago·5 Sept 2026, 9:19 am
Credit-risk funds have recently outperformed other debt categories, delivering an impressive 8.97% return over the past three years. This strong performance is driven by improving corporate fundamentals and attractive yields available on lower-rated debt securities. For investors seeking higher income than traditional fixed deposits, this category has become an attractive option.
However, these higher returns come with significant trade-offs. These funds invest in lower-rated corporate bonds, which carry a greater risk of default. Experts warn that factors like credit downgrades or a sudden liquidity crunch can severely impact the fund's value. Therefore, investors must carefully assess the credit quality of the underlying assets before committing capital.
Going forward, investors should monitor the credit quality of the portfolio and the prevailing interest rate environment. While the current returns are enticing, it is crucial to understand that safety is not guaranteed. A diversified approach and a clear understanding of your risk appetite are essential before making any investment decisions.
Excerpt from Mint
Credit-risk funds delivered 8.97% returns over three years, emerging as the best-performing debt mutual fund category amid improving corporate fundamentals. Experts caution that higher returns come with greater credit, downgrade and liquidity risks, making portfolio quality crucial for investors. Credit-risk funds…Read the original at Mint
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