There are a lot of terms which are important when dealing with SBI Credit Risk Fund. Investors are often not well aware of the risk and return parameters in the portfolio. A lot of investors only look for returns over a time horizon and ignore various other aspects. Hence, they start investing in this scheme with this mindset which is not appropriate. Further, they influence other investors to follow the same mindset as well. But, when things do not move as planned, they get panicked and start redeeming their investments. So, it is necessary to consult the financial adviser first or read about the debt funds in detail to get relevant information. Here are 5 points every investor misunderstands about SBI Credit Risk Fund G.
Risk-Free
Some investors are attracted towards SBI Credit Risk Fund growth with the misconception that this scheme is risk-free. It is something that every investor should clarify first. The investment in the mutual fund will always have some risk measures, although, you can analyse the portfolio of the fund to measure the intensity of the risk.
Generally, debt funds have three types of risks which are the interest rate, liquidity, and credit risk. This scheme invests in A and below rated papers, so it has liquidity and credit risk. Therefore, the next time you invest in SBI Credit Risk Fund G, you should understand that it is not risk-free.
Never Give Negative Returns
Most of the investors believe that SBI Credit Risk Fund returns can never be negative whatsoever the conditions, which is not true. Like, it is not totally risk-free, it can produce negative returns as well. Although, the chances are very less and it has consistently generated positive returns over a time horizon, confusing it with entirely positive return generating fund is again a misconception.
Here, I need to clarify that this scheme has consistently produced positive returns considering annual performance and never touched negative graph till now.
Not for Aggressive Investors
The investors with low to moderate risk-appetite and reasonable return expectations are advised by experts to invest in SBI Credit Risk Fund. That doesn’t imply that the investors with high risk-appetite should never invest in this scheme.
The experts suggest this scheme to aggressive investors as well to get the advantage of diversification. Although, they are advised to invest a portion of total assets not the whole corpus. So, you need to change your misconception that this scheme is for risk-averse investors only.
AUM Doesn’t Matter
For debt funds, AUM matters because the cash flows in the portfolio are of significant size. The assets managed by SBI Credit Risk Fund is worth Rs 5,385 crore (as on 30th Nov 2018) which is neither too high and nor too low. A well sized AUM provides the manager some freedom to arrange it well without burdening the investors with huge expenses to manage.
Can Redeem Any Time
Yes, you can redeem any time, but there is an exit load to pay before withdrawing. Further, you couldn’t generate expected returns in a very short term of one year from SBI Credit Risk Fund growth. To redeem before 365 days, you have to pay 3% charges for redeeming more than 8% of the invested corpus. For 366 to 730 days, 1.5% will be charged for withdrawing more than 8% assets. In addition, 0.75% is charged for redeeming in excess of 8% invested amount in the duration of 731-1095.
Summing it all, the investors are required to be well aware of the myths prevailing in the industry about SBI Credit Risk Fund and bust them to become confident in the investment objectives.
This article explains five common points which investors get wrong while investing in SBI Credit Risk Fund.
Dishika is a financial expert at MySIPonline. She has 5-years of experience in analyzing various debt schemes.