Risks of investing in MF schemes: #3 Credit risk
Thursday, July 6, 2017, 6:33 PM
A debt mutual fund is subject to credit risk if the bond issuer defaults in repayment obligation. If the MF scheme holds a portfolio of debt instruments and securities that are not highly rated by credit-rating-agencies, the risk of default is higher. If the issuer defaults in repayment, the debt fund may sustain a loss and accordingly NAV of the scheme will be adversely-impacted.