Factors to Consider Before Investing in Credit Risk Mutual Fund
1. Diversification: Credit Risk Mutual Funds are managed by fund managers, and every fund will have its own set of parameters and composition of different asset classes. So, the investor needs to study the individual composition that fits his investing parameter.
2. Time Horizon: If an investor has a medium to long time horizon, only then he/she should consider Credit Risk Mutual Fund, as they have proved to be beneficial in the long run, i.e. around a period of three years. If investors have short-term goals, and they are looking for a fund, Credit Risk Mutual Fund might not be the right choice for them.
3. Tax Implications: Investors need to ascertain the tax implication of the fund, if he/she is ignorant about the tax implication, they might not get a fruitful return out of it.
4. Risks: Investors should consider his/her risk appetite before investing. Credit Risk Mutual Funds are prone to risks and are categorised as high-risk funds on investment riskometers. If the investor wants to minimise the risk, he/she should approach a fund that has a lower dependence on equity.
5. Expense Ratio: Investors should precisely go through the investment terms and conditions, and should carefully understand the expense ratio, as a fund with a lower expense ratio is always better than a fund with a higher expense ratio.