{"id":78093,"date":"2026-10-28T16:16:48","date_gmt":"2026-10-28T10:46:48","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?post_type=markets&#038;p=78093"},"modified":"2026-10-28T16:17:24","modified_gmt":"2026-10-28T10:47:24","slug":"measuring-mutual-fund-returns","status":"publish","type":"markets","link":"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/measuring-mutual-fund-returns\/","title":{"rendered":"Measuring Mutual Fund Returns"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"78093\" class=\"elementor elementor-78093\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-4be72f6 elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\" data-id=\"4be72f6\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-d209c0c\" data-id=\"d209c0c\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-inner-section elementor-element elementor-element-896d102 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"896d102\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-wide\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-inner-column elementor-element elementor-element-c9133f2 chapters_list\" data-id=\"c9133f2\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-aa101bd elementor-widget elementor-widget-shortcode\" data-id=\"aa101bd\" data-element_type=\"widget\" data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\">\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery(\"#post_chapters a[href*='\" + location.pathname + \"']\")\n\t\t\t\t.addClass(\"current\")\n\t\t\t\t.attr(\"aria-current\", \"page\");\n\t\t})\n\t<\/script>\n\t<div class=\"desktop_chapters\"><div id=\"post_chapters\"><div class=\"post_chapters-heading\">Chapters<\/div><ul><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/background-and-orientation\/\">Background and Orientation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-math\/\">Personal Finance Math<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/money-today-vs-money-tommorrow\/\">Money Today vs Money Tommorrow<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-retirement-part-1\/\">The Retirement -Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/assumptions-in-retirement-planning\/\">Assumptions in Retirement Planning<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-stock-funds\/\">The Role of Mutual Funds in Modern Finance<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/concept-of-fund-and-nav\/\">Concept of Fund and NAV<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-the-performance-of-your-fund\/\">Mutual Fund Factsheet<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-equity-scheme\/\"> The Equity Scheme<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/equity-scheme-part-2\/\">Equity Scheme Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-1\/\">Debt Funds Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/monitoring-your-portfolio\/\">Debt Funds Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-myths\/\">Debt Funds Part 3<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-4\/\">Debt Funds Part 4<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/investing-in-bonds\/\">Investing in Bonds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/index-funds\/\">Index Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/arbitrage-funds\/\">Arbitrage Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/measuring-mutual-fund-returns\/\">Measuring Mutual Fund Returns<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/rolling-returns\/\">Rolling Returns<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-expense-ratio\/\">Mutual Fund Expense Ratio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-benchmarking\/\">Mutual Fund Benchmarking<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-beta-sd-and-sharpe-ratio\/\">Mutual Fund Beta SD and Sharpe Ratio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/sortino-and-capture-ratios\/\">Sortino and Capture Ratios<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/how-to-analyse-equity-mutual-funds\/\">How to Analyse Equity Mutual Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/how-to-analyse-debt-mutual-fund\/\">How to Analyse Debt Mutual Fund<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-portfolio\/\">Mutual Fund Portfolio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/smart-beta-funds\/\">Smart Beta Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/asset-allocation\/\">Asset Allocation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/exchange-traded-funds\/\">Exchange Traded Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/basics-of-macro-economics\/\">Basics of Macro Economics<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-part-1\/\">Personal Finance-Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-review-part-2\/\">Personal Finance Review Part 2 <\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/know-your-funds\/\">Know Your Funds<\/a><\/li><\/ul><\/div><\/div><div class=\"chapters_toggle\"><a href=\"#\" id=\"open_chapters\" aria-label=\"View chapters\"><span>View Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><a href=\"#\" id=\"close_chapters\" style=\"display:none;\" aria-label=\"Hide chapters\"><span>Hide Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><\/div>\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery('.chapters_toggle #open_chapters').click(function(e){\n\t\t\t\te.preventDefault();\n\t\t\t\tjQuery('.desktop_chapters').removeAttr('hidden').css('left', '0px');\n\t\t\t\tjQuery('#open_chapters').css('display', 'none');\n\t\t\t\tjQuery('#close_chapters').css('display', 'block').focus();\n\t\t\t});\n\n\t\t\tjQuery('.chapters_toggle #close_chapters').click(function(e){\n\t\t\t\te.preventDefault();\n\t\t\t\tjQuery('.desktop_chapters').css('left', '-480px').attr('hidden', '');\n\t\t\t\tjQuery('#open_chapters').css('display', 'block');\n\t\t\t\tjQuery('#close_chapters').css('display', 'none');\n\t\t\t\tjQuery('#open_chapters').focus();\n\t\t\t});\n\t\t});\n\t<\/script>\n\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<div 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aria-selected=\"true\" data-tab=\"1\" role=\"tab\" tabindex=\"0\" aria-controls=\"study-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-edit\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Study<\/span>                            \n                                                    <\/li>\n                                            <li id=\"slides\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"2\" role=\"tab\" tabindex=\"-1\" aria-controls=\"slides-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"fas fa-book-open\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Slides<\/span>                            \n                                                    <\/li>\n                                            <li id=\"videos\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"3\" role=\"tab\" tabindex=\"-1\" aria-controls=\"videos-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-eye\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Videos<\/span>                            \n                                                    <\/li>\n                    \n                                  <\/ul>\n            <\/div>\n            \n            <div class=\"eael-tabs-content\">\n\t\t        \n                    <div id=\"study-tab\" class=\"clearfix eael-tab-content-item active-default\" data-title-link=\"study-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Why-Mutual-Fund-Metrics-Matter' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>18.1 <\/strong><strong><b>Why Mutual Fund Metrics Matter<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-77952 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter.png\" alt=\"Why Mutual Fund Metrics Matter\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Mutual-Fund-Metrics-Matter-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>By now, we\u2019ve explored several mutual fund categories \u2014 equity, debt, hybrid, and even niche ones like arbitrage. Each has its own mandate and risk\u2013return profile. But knowing the type of fund is only half the story. To truly judge whether a fund is worth investing in, you need to understand the metrics that describe its performance and behavior.<\/p>\r\n<p>Think of metrics as the \u201cvital signs\u201d of a mutual fund. Just as a doctor looks at blood pressure, heart rate, and cholesterol to assess health, an investor looks at returns, volatility, expense ratio, and other indicators to assess a fund\u2019s quality. These numbers are published in fund factsheets and on research platforms like Morningstar or Value Research. The challenge is not the lack of data \u2014 it\u2019s knowing which numbers matter and which ones are noise.<\/p>\r\n<p>Metrics help answer critical questions:<\/p>\r\n<ul>\r\n<li>Is the fund consistently delivering returns, or is it erratic?<\/li>\r\n<li>How much risk is the fund taking to generate those returns?<\/li>\r\n<li>Are the costs eating into your profits?<\/li>\r\n<li>Does the fund behave differently from the broader market?<\/li>\r\n<\/ul>\r\n<p>Without metrics, you are essentially investing blind. With them, you can separate strong funds from mediocre ones and align your choices with your financial goals.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='Measuring-Mutual-Fund-Performance' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>18.2\u00a0<\/b><\/strong><strong><b>Measuring Mutual Fund Performance<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-77953 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance.png\" alt=\"Measuring Fund Performance\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Measuring-Fund-Performance-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Investors often get confused because they apply the same return calculation method across all types of investments. But the way you measure returns depends on how you invested (lumpsum vs SIP) and how long you stayed invested.<\/p>\r\n<p><strong><b>Lumpsum vs SIP<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Lumpsum investment<\/b><\/strong>: You invest a large amount at once. For example, you receive a \u20b91,00,000 bonus and put \u20b970,000 into a mutual fund.<\/li>\r\n<li><b><\/b><strong><b>Systematic Investment Plan (SIP)<\/b><\/strong>: You invest a fixed amount at regular intervals. For instance, \u20b93,000 every month into a mid-cap fund.<\/li>\r\n<\/ul>\r\n<p>The way you measure returns for these two styles is different. If you simply look at the starting and ending values, you miss the role of time. An 80% gain sounds fantastic, but if it took 15 years, the annual growth rate is actually modest. That\u2019s why time must always be factored in.<\/p>\r\n<p><strong><b>Absolute Return<\/b><\/strong><\/p>\r\n<p>Absolute return is the simplest metric. It tells you how much your investment grew in total, without considering time. It\u2019s useful only for investments held for less than a year.<\/p>\r\n<p><strong><b>Example (Lumpsum):<\/b><\/strong>\u00a0You invest \u20b920,000 in January. By September, it grows to \u20b924,000. Absolute return = (24,000 \u00f7 20,000) \u2013 1 = 20%.<\/p>\r\n<p><strong><b>Example (SIP):<\/b><\/strong>\u00a0You invest \u20b94,000 per month for six months (\u20b924,000 total). By the end, the value is \u20b927,000. Absolute return = (27,000 \u00f7 24,000) \u2013 1 = 12.5%.<\/p>\r\n<p>This is intuitive because you can directly see the gain relative to what you invested. But beyond a year, absolute return becomes misleading because it ignores time.<\/p>\r\n<p><strong><b>CAGR \u2013 Compound Annual Growth Rate<\/b><\/strong><\/p>\r\n<p>When the investment period is more than a year, absolute return becomes misleading. CAGR tells you the average annual growth rate.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0You invest \u20b950,000 in July 2018. By July 2021, it grows to \u20b980,000. CAGR = (80,000 \u00f7 50,000)^(1\/3) \u2013 1 \u2248 17.0%.<\/p>\r\n<p>This means your investment grew at an average of about 17% per year. It doesn\u2019t matter whether one year was flat and another year was high growth \u2014 CAGR smooths it out, just like calculating the average speed of a car journey rather than listing speeds at every stretch of road.<\/p>\r\n<p>CAGR also helps you project future values. If your fund is growing at about 17% annually, you can estimate what it might be worth in three more years, keeping in mind that past growth rates are not guaranteed to continue. This makes CAGR a powerful tool for long-term planning.<\/p>\r\n<p><strong><b>XIRR \u2013 Extended Internal Rate of Return<\/b><\/strong><\/p>\r\n<p>CAGR works well for lumpsum investments, but SIPs involve multiple cash flows at different times. That\u2019s where XIRR comes in. XIRR is essentially CAGR adjusted for staggered investments.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0You invest \u20b95,000 every month from January 2021 to July 2022 (19 months, total \u20b995,000). By July 2022, the value is \u20b91,10,000. Using Excel\u2019s XIRR function, you input the cash outflows (each SIP installment) and the final value. Assuming each instalment is invested on the 1st of the month and the portfolio is valued on 1 July 2022, the result works out to about 21%.<\/p>\r\n<p>This tells you the effective annual growth rate of your SIP, accounting for the fact that some installments had more time to grow than others.<\/p>\r\n<p>For SIPs under a year, XIRR can give unintuitive results. For instance, a five-month SIP of \u20b925,000 growing to \u20b930,000 might show an XIRR of 100%+, which feels unrealistic. That\u2019s why platforms usually show absolute return for short-term SIPs and XIRR for longer ones.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Linking-CAGR-and-XIRR' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>18.3. <\/strong><strong><b>Linking CAGR and XIRR<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-77954 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR.png\" alt=\"CAGR and XIRR\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/CAGR-and-XIRR-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>At their core, CAGR and XIRR measure the same thing: the growth rate of an investment over time. The difference is in application. CAGR is perfect for single lumpsum investments, while XIRR is designed for staggered SIPs. But if you apply both to a lumpsum held for multiple years, they give the same answer.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0You invest \u20b91,00,000 in January 2019. By January 2021, it grows to \u20b91,25,000. CAGR = (1,25,000 \u00f7 1,00,000)^(1\/2) \u2013 1 = 11.8%. XIRR (using the same cash flows) also gives 11.8%.<\/p>\r\n<p>This shows that XIRR is essentially a generalization of CAGR. For SIPs, you need XIRR; for lumpsum, CAGR suffices. Both help you understand not just how much you earned, but how efficiently your money grew over time.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='Beyond-Returns-Other-Key-Metrics' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>18.4. <\/strong><strong><b>Beyond Returns: Other Key Metrics<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77955 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns.png\" alt=\"Beyond Returns\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Beyond-Returns-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>While returns are the most visible metric, they are not the only ones that matter. To truly judge a fund, you must look at risk, consistency, and efficiency.<\/p>\r\n<p><strong><b>Rolling Returns<\/b><\/strong><\/p>\r\n<p>Rolling returns measure performance across overlapping time periods. For example, a fund\u2019s 3-year rolling return might be calculated for every month over the past 10 years. This shows whether the fund consistently delivered returns or had long stretches of underperformance. Rolling returns are more reliable than point-to-point returns, which can be distorted by market timing.<\/p>\r\n<p><strong><b>Expense Ratio<\/b><\/strong><\/p>\r\n<p>The expense ratio tells you how much of your investment is eaten up by fund management costs. A fund with a 2% expense ratio must earn 1.5% more (before costs) every year just to match the net return of a fund with a 0.5% ratio. Over long periods, this difference compounds significantly. Low-cost funds often outperform high-cost ones simply because they leave more money in the investor\u2019s pocket.<\/p>\r\n<p><strong><b>Standard Deviation<\/b><\/strong><\/p>\r\n<p>Standard deviation measures volatility \u2014 how much the fund\u2019s returns fluctuate. A fund with a high standard deviation may deliver spectacular gains but also sharp losses. A lower standard deviation indicates stability. Investors must match their risk appetite with the volatility profile of the fund.<\/p>\r\n<p><strong><b>Beta<\/b><\/strong><\/p>\r\n<p>Beta measures how much a fund moves relative to the market. A beta of 1 means the fund moves in line with the market. A beta greater than 1 means the fund is more volatile than the market, while less than 1 means it is more defensive. For example, a beta of 1.2 suggests that, on average, the fund tends to rise about 12% when the market rises 10%, and fall about 12% when the market falls 10%.<\/p>\r\n<p><strong><b>Sharpe Ratio<\/b><\/strong><\/p>\r\n<p>The Sharpe ratio measures risk-adjusted returns. It is calculated as (fund return \u2212 risk\u2011free rate) \u00f7 standard deviation, and tells you how much excess return the fund generated per unit of risk taken. A higher Sharpe ratio indicates better efficiency. For example, if Fund A and Fund B both delivered 12% returns, but Fund A had lower volatility, its Sharpe ratio would be higher, making it the superior choice.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Putting-Metrics-Together' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>18.5 <\/strong><strong><b>Putting Metrics Together<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77956 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together.png\" alt=\"Putting Metrics Together\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Putting-Metrics-Together-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>No single metric tells the whole story. Absolute return shows total gain, CAGR shows annualized growth, XIRR handles SIPs, rolling returns show consistency, expense ratio shows cost efficiency, standard deviation shows volatility, beta shows market sensitivity, and Sharpe ratio shows risk-adjusted performance. Together, they provide a 360-degree view of a fund.<\/p>\r\n<p>An investor must learn to interpret these metrics in combination. For example:<\/p>\r\n<ul>\r\n<li>A fund with high returns but also high volatility may not suit a conservative investor.<\/li>\r\n<li>A fund with modest returns but low expense ratio and high Sharpe ratio may be ideal for long-term wealth building.<\/li>\r\n<li>Rolling returns can reveal whether a fund\u2019s strong performance is consistent or just a lucky streak.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Key-Takeaways' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>18.6 <\/strong><strong><b>Key Lessons<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-76118 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4.png\" alt=\"Key Takeaways\" width=\"444\" height=\"418\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4.png 444w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-300x282.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-50x47.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-100x94.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-150x141.png 150w\" sizes=\"(max-width: 444px) 100vw, 444px\" \/><\/p>\r\n<ul>\r\n<li>Use <strong><b>absolute return <\/b><\/strong>for investments under a year (lumpsum or SIP).<\/li>\r\n<li>Use <strong><b>CAGR <\/b><\/strong>for lumpsum investments over a year.<\/li>\r\n<li>Use <strong><b>XIRR <\/b><\/strong>for SIPs over a year.<\/li>\r\n<li>CAGR and XIRR are conceptually the same, but XIRR handles staggered cash flows.<\/li>\r\n<li>Always factor in time when judging returns \u2014 because 80% over one year is very different from 80% over fifteen years.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tvar resize_77909 = jQuery('.owl-carousel');\n\t\tresize_77909.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p><p>\u00a0<\/p>                    <\/div>\n\t\t        \n                    <div id=\"slides-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"slides-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Why-talk-about-bonds-now?' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>15.1 <\/strong><strong><b>Why talk about bonds now?<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77926 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now.png\" alt=\"Why Talk About Bonds Now\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Why-Talk-About-Bonds-Now-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>We have just finished exploring debt mutual funds, which are essentially baskets of bonds managed by professionals. Before moving on to index funds, it makes sense to pause and understand bonds themselves. After all, debt funds are nothing but a collection of bonds, and if fund managers can buy them directly, so can you. Today, investors don\u2019t need to rely only on mutual funds, there are stock exchanges, SEBI\u2011registered Online Bond Platform Providers (OBPPs) and, for government securities, RBI Retail Direct, all of which allow individuals to purchase bonds directly, much like buying shares. Understanding bonds at this stage helps you see the mechanics behind debt funds and gives you the option to invest without an intermediary.<\/p>\r\n<p>Debt mutual funds are essentially collections of bonds. By learning bonds directly, you understand what fund managers are doing behind the scenes.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>A debt fund like HDFC Corporate Bond Fund invests in PSU bonds such as Power Finance Corporation (PFC).<\/li>\r\n<li>As an individual, you can also buy listed PFC bonds directly on NSE\/BSE through your broker, or through a SEBI\u2011registered online bond platform.<\/li>\r\n<\/ul>\r\n<p>This means you can bypass the AMC if you want more control, though you\u2019ll lose professional management.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash=' Looking-at-bonds-before-investing' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>15.2 <\/b><\/strong><strong><b>Looking at bonds before investing<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77927 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing.png\" alt=\"Looking at Funds Before Investing\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Looking-at-Funds-Before-Investing-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Imagine you\u2019re browsing the stock exchange website and come across bonds issued by a government-backed company, say Power Finance Corporation (PFC). Each bond issue has a unique identification number called an ISIN, much like a fingerprint. Clicking on a bond reveals details such as whether it is tax-free, its credit rating, issue date, maturity date, coupon rate, and face value.<\/p>\r\n<p>For example, suppose a PFC bond carries a tax-free tag. This means the interest you earn annually is exempt from income tax, making it highly attractive for investors in higher tax brackets. Note that no new tax\u2011free bonds have been issued since 2015\u201316, so today they can be bought only in the secondary market on NSE\/BSE. However, if you sell the bond before maturity at a profit, that gain is taxable as capital gains. For listed bonds held for more than 12 months, long\u2011term capital gains are currently taxed at 12.5% without indexation; gains on bonds held for 12 months or less are taxed at your income\u2011tax slab rate. Next, you notice the <strong><b>credit rating<\/b><\/strong>\u2014say AAA from CRISIL. This rating signals that the issuer is extremely reliable in repaying its debt. Since PFC is a government-owned company (a Maharatna PSU under the Ministry of Power), so the risk of default is considered minimal, although its bonds are not explicitly guaranteed by the government.<\/p>\r\n<p>Other details matter too. If the bond is marked as secured, it means the issuer has pledged assets against the borrowing, similar to how banks secure car loans against the vehicle. This reduces risk further. You\u2019ll also see the issue date and maturity date\u2014perhaps issued in 2015 and maturing in 2030, making it a 15 year instrument. Finally, the coupon rate\u00a0tells you how much interest you\u2019ll earn annually based on the bond\u2019s face value. If the coupon is 7% and the face value is \u20b91,000, you\u2019ll receive \u20b970 per bond each year until maturity.<\/p>\r\n<p><strong><b>Looking at Bonds Before Investing<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Detail<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Meaning<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Example<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>ISIN<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Unique identifier for each bond issue.<\/p>\r\n<\/td>\r\n<td>\r\n<p>PFC bond ISINs begin with \u2018INE134E\u2019, PFC\u2019s issuer code.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Tax-Free Tag<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Interest exempt from income tax.<\/p>\r\n<\/td>\r\n<td>\r\n<p>NHAI Tax-Free Bonds (2015\u201316 issue).<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Credit Rating<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Reliability of issuer.<\/p>\r\n<\/td>\r\n<td>\r\n<p>AAA rating for PFC bonds.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Secured\/Unsecured<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Whether assets are pledged.<\/p>\r\n<\/td>\r\n<td>\r\n<p>REC secured bonds backed by receivables.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Issue &amp; Maturity Date<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Tenure of the bond.<\/p>\r\n<\/td>\r\n<td>\r\n<p>Issued 2015, maturing 2030 (15 years).<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Coupon Rate<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Annual interest on face value.<\/p>\r\n<\/td>\r\n<td>\r\n<p>7% coupon \u2192 \u20b970 per \u20b91,000 bond.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>Example:<\/b><\/strong>\u00a0If you buy a PFC Tax-Free Bond (October 2015 issue, 15-year series, 7.52% retail coupon, AAA-rated), you\u2019ll receive tax-free interest every year until it matures in 2030. (The 10-year series of the same issue, with a 7.36% retail coupon, matured in 2025.)<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Yield-to-Maturity' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>15.3.<\/strong><strong><b>Yield to Maturity (YTM)<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77928 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity.png\" alt=\"Yield to Maturity\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Yield-to-Maturity-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>While the coupon looks straightforward, the real measure of return is the Yield to Maturity (YTM). Think of it like buying a rental property. Suppose you buy a shop for \u20b950 lakh and rent it out for \u20b95 lakh per year. That\u2019s a 10% rental yield. But if you later sell the shop for the same \u20b950 lakh, your net yield remains 10%. If you bought it at \u20b955 lakh instead, your yield drops because your cost was higher. Conversely, if you bought it at \u20b945 lakh, your yield rises because you paid less for the same rent.<\/p>\r\n<p>Bonds work the same way. The coupon is fixed, but the price you pay for the bond changes in the market. If a bond with a \u20b91,000 face value and 7% coupon is trading at \u20b91,080, you still earn \u20b970 annually, but your effective yield is lower because you paid more upfront. On maturity, you\u2019ll only get back \u20b91,000, not the premium you paid. That\u2019s why YTM often differs from the coupon\u2014it reflects the actual return considering both interest payments and the difference between purchase price and redemption value.<\/p>\r\n<p><strong><b>Yield to Maturity (YTM)<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Scenario<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Bond Price<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Coupon (\u20b970)<\/b><\/strong><\/p>\r\n<\/td>\r\n<td width=\"368\">\r\n<p><strong><b>Current Yield (Coupon \u00f7 Price)<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Buy at Face Value<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,000<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b970<\/p>\r\n<\/td>\r\n<td width=\"368\">\r\n<p>7%<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Buy at Premium<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,080<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b970<\/p>\r\n<\/td>\r\n<td width=\"368\">\r\n<p>~6.48%<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Buy at Discount<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b9950<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b970<\/p>\r\n<\/td>\r\n<td width=\"368\">\r\n<p>~7.37%<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>Example:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>If you buy a REC bond at \u20b91,080, your yield drops below the coupon because you paid extra.<\/li>\r\n<\/ul>\r\n<p>If you buy at \u20b9950, your yield rises since you paid less for the same coupon. Note: the yields in the table are current yields (coupon \u00f7 price). The YTM moves even further in the same direction, because the \u20b980 premium is lost at maturity (pushing YTM below 6.48%), while the \u20b950 discount is gained at maturity (pushing YTM above 7.37%).<\/p>\r\n<h2 style=\"text-align: left\"><b><\/b><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77904 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds.png\" alt=\"Credit Risk Funds\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/05\/Credit-Risk-Funds-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/h2>\r\n<p>Credit Risk Funds are the adrenaline junkies of the debt world. Their mandate is to invest at least 65% in lower-rated corporate bonds (AA and below, excluding AA+). These bonds pay higher interest because the issuers are riskier. The fund manager\u2019s bet is that the company will not default and may even improve its credit rating over time. If that happens, the bond price rises, boosting the fund\u2019s NAV along with the coupon income.<\/p>\r\n<p>Picture a landlord renting out property to a tenant with a shaky financial history. The tenant agrees to pay double the rent to compensate for the risk. If the tenant stabilizes his income, the landlord benefits both from the high rent and from the improved reputation of the property. But if the tenant defaults, the landlord suffers a heavy loss. That\u2019s exactly how credit risk funds operate.<\/p>\r\n<p>The danger lies in concentration. Even within SEBI\u2019s single-issuer limits (lower for lower-rated papers), some funds allocate large chunks to a single company. If that company defaults, the NAV can collapse overnight. For retail investors, this risk is unnecessary. Most personal financial goals\u2014retirement, education, home purchase\u2014can be achieved with safer debt categories. Credit Risk Funds are better left to institutional players who can absorb shocks. For individuals, avoiding them is the wiser choice.<\/p>\r\n<p>High ratings are no guarantee either. DHFL was rated AAA until early 2019, was downgraded as its troubles grew and defaulted in June 2019. The losses hit many debt schemes, not only credit risk funds, which is why every debt investor should check the quality of the papers in a portfolio.<\/p>\r\n<p><strong><b>Credit Risk Funds<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Aspect<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Explanation<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Example<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Mandate<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>At least 65% in bonds rated AA &amp; below (excluding AA+).<\/p>\r\n<\/td>\r\n<td>\r\n<p>Nippon India Credit Risk Fund (formerly Reliance Credit Risk Fund).<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>High Yield<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Lower-rated issuers pay higher interest.<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bonds of stressed issuers such as DHFL traded at high yields before default.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Concentration Danger<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Large exposure to one issuer magnifies risk.<\/p>\r\n<\/td>\r\n<td>\r\n<p>DHFL default in 2019 caused sharp NAV markdowns.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Suitability<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Better for institutions, not retail investors.<\/p>\r\n<\/td>\r\n<td>\r\n<p>Affected schemes suffered sharp losses and side-pocketing.<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='Accrued-Interest' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>15.4 .<\/strong><strong><b>Accrued Interest<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77929 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest.png\" alt=\"Accrued Interest\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Accrued-Interest-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Now let\u2019s talk about accrued interest. Suppose a bond pays its annual coupon every 1st January. If you buy the bond in July, the seller has already held it for six months and earned half the year\u2019s interest. To be fair, you compensate the seller for that portion by paying a slightly higher price, which includes accrued interest. When January arrives, you\u2019ll receive the full coupon, even though you only held the bond for half the year. This adjustment ensures fairness between buyer and seller.<\/p>\r\n<p>In bond markets, the settlement price\u00a0(the amount you pay) includes accrued interest and is called the \u201cdirty price.\u201d The price excluding accrued interest is the \u201cclean price.\u201d For example, if the clean price is \u20b91,020 and six months of accrued interest on a 7% coupon is \u20b935, the dirty price you pay is \u20b91,055. This mechanism ensures that the seller is paid interest for the period they held the bond, and the buyer earns interest only for the period they hold it.<\/p>\r\n<p><strong><b>Accrued Interest<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Term<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Meaning<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Example<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Clean Price<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Price excluding accrued interest.<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,020<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Accrued Interest<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Interest earned by seller till date.<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b935<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Dirty Price<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Settlement price (Clean + Accrued).<\/p>\r\n<\/td>\r\n<td>\r\n<p>\u20b91,055<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>Example:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>A bond pays coupon every 1st January.<\/li>\r\n<li>You buy in July \u2192 seller already earned 6 months\u2019 interest.<\/li>\r\n<li>You pay <strong><b>dirty price <\/b><\/strong>(includes accrued interest).<\/li>\r\n<li>In January, you still receive full coupon (\u20b970).<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Should-You-Invest-in-Bonds' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>15.5 .<\/strong><strong><b>Should you invest in bonds?<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-77930 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds.png\" alt=\"Should You Invest in Bonds\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-in-Bonds-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Many investors lean heavily toward equities because of their growth potential. But market shocks\u2014like the sudden crash during the pandemic\u2014remind us that diversification is essential. When stock indices fell sharply, even many long-term SIPs briefly showed negative returns, leaving equity only investors exposed. Bonds, gold, and fixed deposits act as stabilizers in such times. They may not deliver spectacular returns, but they provide safety and predictable income.<\/p>\r\n<p>Today, you can build a portfolio using a mix of assets: equities for growth, mutual funds for diversification, bonds for stability, gold for inflation protection, and fixed deposits for liquidity. The right blend depends on your goals\u2014whether it\u2019s wealth creation, retirement planning, or capital preservation. Bonds deserve a place in that mix because they balance risk and return, ensuring your portfolio doesn\u2019t crumble during market downturns.<\/p>\r\n<p><strong><b>Should You Invest in Bonds?<\/b><\/strong><\/p>\r\n<p>Bonds stabilize portfolios during equity downturns.<\/p>\r\n<p><strong><b>Examples of Diversification:<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Equities<\/b><\/strong>: Growth (Infosys, Reliance shares).<\/li>\r\n<li><b><\/b><strong><b>Bonds<\/b><\/strong>: Stability (PFC, NHAI tax-free bonds).<\/li>\r\n<li><b><\/b><strong><b>Gold<\/b><\/strong>: Inflation hedge.<\/li>\r\n<li><b><\/b><strong><b>FDs<\/b><\/strong>: Liquidity.<\/li>\r\n<\/ul>\r\n<p>During the COVID-19 crash (February\u2013March 2020), the Nifty 50 and Sensex fell about 38% from their January 2020 peaks. High-quality bonds and gilt funds cushioned portfolios, proving their stabilizing role.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide06' class='sa_hover_container' data-hash='Key-Takeaways' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2 style=\"text-align: left\"><strong>15.6.<\/strong><strong><b>Key takeaways<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-76118 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4.png\" alt=\"Key Takeaways\" width=\"444\" height=\"418\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4.png 444w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-300x282.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-50x47.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-100x94.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2022\/01\/Key-Takeaways-4-150x141.png 150w\" sizes=\"(max-width: 444px) 100vw, 444px\" \/><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Tax-free bonds <\/b><\/strong>provide interest income exempt from tax (no new issues since 2015\u201316; they are available only in the secondary market).<\/li>\r\n<li><b><\/b><strong><b>PSU bonds <\/b><\/strong>generally carry low credit risk because of government ownership, though most are not explicitly government-guaranteed.<\/li>\r\n<li><b><\/b><strong><b>Coupon rate <\/b><\/strong>is fixed on face value, but actual returns depend on purchase price.<\/li>\r\n<li><b><\/b><strong><b>Yield to Maturity <\/b><\/strong>reflects the true return considering both coupon and redemption value.<\/li>\r\n<li><b><\/b><strong><b>Accrued interest <\/b><\/strong>ensures fairness between buyer and seller during coupon cycles.<\/li>\r\n<li><b><\/b><strong><b>Diversification <\/b><\/strong>with bonds and other assets protects against equity market shocks.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tjQuery('.text_slider_goto6').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 5);\n\t\t});\n\t\tvar resize_77925 = jQuery('.owl-carousel');\n\t\tresize_77925.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p>                    <\/div>\n\t\t        \n                    <div id=\"videos-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"videos-tab\">\n\t\t\t\t        <p><img decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2021\/10\/coming-soon-person-g8026473a8_1920-removebg-preview.png\" \/><\/p>                    <\/div>\n\t\t                    <\/div>\n        <\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Study Slides Videos 18.1 Why Mutual Fund Metrics Matter By now, we\u2019ve explored several mutual fund categories \u2014 equity, debt, hybrid, and even niche ones like arbitrage. Each has its own mandate and risk\u2013return profile. But knowing the type of fund is only half the story. To truly judge whether a fund is worth investing &#8230; <a title=\"Measuring Mutual Fund Returns\" class=\"read-more\" href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/measuring-mutual-fund-returns\/\" aria-label=\"Read more about Measuring Mutual Fund Returns\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"parent":11088,"menu_order":14,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"class_list":["post-78093","markets","type-markets","status-publish","format-standard","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78093","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets"}],"about":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/types\/markets"}],"author":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/comments?post=78093"}],"version-history":[{"count":4,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78093\/revisions"}],"predecessor-version":[{"id":78114,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78093\/revisions\/78114"}],"up":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/11088"}],"wp:attachment":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media?parent=78093"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/categories?post=78093"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}