How do you select a debt instrument for investment?

The question is more around long term investment - min 5 years.
How to decide between the mutual funds which are investing in govt security and corporate bonds.

The only reason i have a doubt in govt securities is around the interest rate risk, but I guess that fades away. However at the same time, corporate bonds tends to give higher rate of interest, and if you are choosing the AAA rated bonds, then is the risk at the same level as govt securities? :thinking:

P.S. i am still a beginner here in investment. As far as I have read, we shouldn’t care about the ROI incase of debt part of your investments, but at the same time, we say that putting money in FD is just waste. So , wanted to understand where should anyone draw the line there.

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Hey Puneet, welcome to the community

Govt securities are risk free because the issues is the govt and won’t default also called as ‘risk-free gilt-edged instruments’. AAA rated corp bonds or other debt instruments hold more risk than them as they are independently risk rated by 3rd part risk agencies.

We’ve seen cases in the past that issuers AAA rated debt instruments have seen troubled times and cases where repayments have been delayed/ not paid.

For things you definitely could avoid check this:

Good luck with your investments journey!

1 Like

This might help, @Puneet_Goyal

This gives you a perspective while choosing amongst a host of debt-oriented mutual funds!
Trust this helps :smiley: Do let the community for any such q’s and someone will help righaway!

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