This debt fund generated a strong return of 141 per cent in a year; have you invested in it?

Bank of India Credit Risk Fund returned 141.61 per cent in the last one year. Should you put money into them? Let us investigate.

Investors often look for returns from Debt Funds that can exceed those from bank fixed deposits (FD). Even earning a double-digit return is understandable.

A debt fund's returns of more than 100 per cent, on the other hand, may catch anyone's attention. This would also cause individuals to hurry to invest such funds. Is it, however, worthwhile to invest in them? In this post, we will discover the same. So, keep an eye out.

In the past year, the Bank of India Credit Risk Fund has generated returns of 141.61 per cent. This is quite appealing, especially for a debt fund. However, it is critical to first check before investing in them.

Why did this fund give returns over 100 per cent?

Because this is a credit risk fund, it will most likely invest in lower-rated securities. This fund's returns increased in tandem with the recovery from Sintex BAPL and Amanta Healthcare. These firms' papers had already been written down.

Bank of India Credit Risk Fund was impacted by many defaults throughout the default cycle from September 2018 to March 2020. The larger returns in this fund are primarily due to the low base caused by write-downs.

Understand this before investing

When investing in a debt fund, it is important to first understand why you are doing so. If your primary objective is capital preservation or outperforming FD returns, avoid investing in credit risk funds. In this case, investing in target maturity debt funds makes more sense.

Credit risk funds are intended for individuals who can stomach the extra risk that comes with them. Furthermore, investing in credit risk funds necessitates a high level of active management as well as a thorough knowledge of the credit and interest rate cycles.