Consider well-diversified credit risk funds with limited exposure

Investors should observe a few precautions, despite the likely higher returns

Investors exited from credit risk funds in large numbers after Franklin Templeton Mutual Fund announced the winding up of six of its debt schemes in April. They moved to safer categories like banking and PSU and corporate bond funds. However, with the economy recovering gradually, experts say investors can consider credit risk funds again.
 

What is on offer?
 

Credit risk funds invest in bonds with AA and below ratings. These bonds are higher risk compared to their AAA-rated counterparts and, hence, offer higher interest. These funds run a diversified portfolio of lower-rated bonds and thereby try to earn better returns