What Investors Need To Do To Enhance Their Basic Fixed Income Returns

The most basic, and safe, returns on investments are those derived from liquid funds, or returns from fixed income funds that are of good credit quality. While asset classes such as equities provide better returns, there are ways that conservative investors can enhance their basic returns without taking too much of the incremental risk.

- Joydeep Sen

The current corporate credit environment is relatively better than earlier. There are now more credit rating upgrades by rating agencies than downgrades. Corporate balance sheets, too, are less leveraged; most companies did a good job of deleveraging during the covid pandemic. There are bonds and debentures rated lower than AAA, say AA or A, but are of somewhat good quality. One way to invest in these is through credit risk funds of mutual funds. However, the expenses charged for credit risk funds are usually higher, which would take away from the higher returns that one gets from the papers that are rated AA or lower.