Kotak Bond Fund

The Kotak Bond Fund is an open-ended fund that invests in debt or other money market securities. The prime focus of the investments is on securities offered by the state or central government and the corporate sector. But it also invests in credit debentures, debt bonds, etc. The Kotak Bond Fund has been in the market for 22 years and has provided stable returns to its investors over a long duration.

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The Kotak Mutual Fund house manages it (Kotak MF) and currently holds INR 1940.47 crores of assets under management (AUM). The investments are spread across the market to spread the risk across assets and, hence, hold up the fund's performance.

The Kotak Bond Fund is offered in two plans:

  • Kotak Bond Fund – Regular Plan.
  • Kotak Bond Fund – Direct Plan.

The direct plan is suitable for those investors who don't require any distributors to route their purchases. Hence, it yields a higher return of up to 1.03% compared to the regular plan, which requires distributors in between.

The above plan options further offer two more variants to choose from. They determine how the investor wants to receive the returns earned. They are:

  • The Growth option – returns earned are reinvested automatically.
  • The Income Distribution and Cash Withdrawal (IDCW) option – It gives the investor the choice of either withdrawing the return or reinvesting it.

Facts about the Fund: Table

Fund name

Kotak Bond Fund

Fund house

Kotak Mutual Fund House

Fund type

Debt bond fund

Fund category

Medium-long duration scheme

Launch date

25 November 1999

Benchmark

Nifty medium to long-duration debt index

Open/close

Open-ended

Investment

Initial minimum investment – INR 5,000

Additional investment – INR 1,000

Risk factor

Moderate risk

Entry load

Nil 

Exit load

  • Exit load for units purchased before 22 February 2018 – nil.
  • Exit load for units purchased after 22 February 2018, within 3 months of allotment – 0.20%
  • Exit load for units purchased after 22 February 2018, after 3 months of allotment – nil.

Investment Objective

The Kotak Bond Fund aims at generating stable returns for its investors over the long run by investing in a variety of debts and money market securities. The choice of securities or bonds for investment is based upon how much credit risk it offers and how much rating it is receiving from the market. It also depends upon market conditions and interest and stability ratings. These choices are made after regular analysis of the market.

Like any other mutual fund, the Kotak Bond Fund also carries risk. To mitigate these risks, the investments are never concentrated in one sector of the market. They are spread widely across the market in a variety of assets. This also spreads the risk across the market, and hence, risks of the fund are reduced. Moreover, bond funds usually carry a lower risk as compared to equity funds. 

Fund Summary

  1. Kotak Bond Fund Regular Plan

    • Risk – Moderate
    • Expense ratio – 1.77% (as of 31 May 2021)
    • Net Asset Value – INR 61.28 (as of 23 June 2021)
    • Returns – 4.52% (1 year)
    • Compound Annual Growth Rate (CAGR) – 8.76% (since inception)
  2. Kotak Bond Fund Direct Plan

    • Risk – Moderate
    • Expense ratio – 0.74% (as of 31 May 2021)
    • NAV – INR 65.94 (as of 23 June 2021)
    • Returns – 5.66% (1 year)
    • CAGR – 8.39% (since inception)

    The IDCW option is offered either quarterly, half-yearly, or annually. The investor can choose either payout of dividend or reinvestment, depending upon their requirement. However, if the dividend is less than INR 500, then it has to be compulsorily reinvested. 

Fund Return Summary

The following table shows the return summary of the Kotak Bond Fund for the regular plan:

Time

Percentage Return

1 year

4.52%

3 year

8.94%

5 year

7.38%

Since inception

8.76%

The following table shows the return summary of the Kotak Bond Fund for the direct plan:

Time

Percentage Return

1 year

5.66%

3 year

10.07%

5 year

8.43%

Since inception

8.39%

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Pros and Cons Of Kotak Bond Fund 

Pros

Cons

The expense ratio is as low as 0.74%.

Not suitable for short-term investment goals.

Lower risks as compared to equity funds.

Moderate risk and hence, chances of losing the capital.

Stable returns in the long run.

Widely spread investments in the market.

Benefits of the Kotak Bond Fund

  • Lower risks involved: The best part about the bond funds is that the risks involved in them are far less than the equity funds. It makes it a safer option for investment.
  • Stable returns: The Kotak Bond Fund aims at generating good returns for investors. And as the fund's history speaks for itself, it has been able to fulfill its aim, and investors have benefited from the stable returns of the fund.
  • Long-term investment: As this fund yields returns in the long run, it is an excellent investment option for investors who aim to invest a portion of their surplus in the present and receive multiplied capital over time for future use.
  • Consistent performance: With all its strategies of picking the right securities for investment and risk-management techniques, the fund has consistently performed well in the market. Backed up by such a positive track record, the fund's future looks good too, which makes it a reliable option for investment.

Fund House Details

The Kotak Bond Fund is offered by the Kotak Mutual Fund House, a part of the larger financial conglomerate – Kotak Mahindra Bank Limited. It is one of the largest private banks in India, and Kotak MF is the fastest-growing mutual fund house in India. It manages the assets of a large customer base, and it is ever-expanding. They aim to become the best and the most trusted fund managers. Therefore, they constantly strive for maximum customer satisfaction.

They believe in disciplined investment. Hence they always depend on deep research and analysis before making decisions. They understand the importance of money for their customers. Hence, they focus more on returning the invested capital without losing than returning interests on the invested capital. 

For this, they follow well worked out risk management techniques that help them in keeping their customer's money safe. They believe in maintaining a partnership with their customers, and hence, they try to provide the best products and financial advice to the customers.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Who Should Invest in the Kotak Bond Fund?

  • Investors with long-term goals: Any investor who wishes to create a financial backup for the future will find this fund plan suitable for them as the fund's objective is to generate stable returns in the long run.
  • Investors with low-risk taking capacity: People who want to invest in mutual funds to get good returns but with minimum risks should invest in this fund as the fund has moderate risk.
  • Investors interested in investing in debt securities: If an investor prefers investing in debt securities, then the Kotak Bond Fund would be an ideal choice for them.

Conclusion

Therefore, to wrap it all, the Kotak Bond Fund is a debt fund, medium-long duration scheme to generate returns in the long run, offered by one of the most trusted and fastest-growing mutual fund houses. The fund is backed up by thorough research and analysis by the experts of Kotak MF. Also, keeping in mind the long history of the fund, it becomes one of the most reliable funds in the market. It is the reason why it has been performing so well in the market.

FAQ's

  • Q. How is a bond fund different from an equity fund?

    A. The bond fund invests in debt bonds or other securities that carry a low risk, while equity funds invest in the stock market, due to which they carry a higher risk.
  • Q. When is the right time to invest in mutual funds?

    A. The earlier one starts investing, the more financial backup they create. However, other factors such as whether the investor is ready to take risks, whether they have the surplus to invest, knowledge of market trends, etc., would affect the decision of starting to invest in mutual funds.
  • Q. Why do fund houses charge expense ratios?

    A. When a fund house manages a customer's assets, they need a charge for doing so. Hence, they charge a small portion of the investment fund as the expense ratio to manage the assets invested effectively.
  • Q. How to avoid the risks of losing the capital invested?

    A. Try investing in low or moderate-risk funds such as the Kotak Bond Fund. Reliable and trusted asset managers should be chosen. Impulsive decisions should be avoided. Lastly, consultation with a trusted financial advisor is advised.
  • Q. How to invest in Kotak Bond Fund?

    A. An investor needs to visit the official website or get in touch with a Kotak MF expert who can take them through the process.
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