Risk averse investors looking to beat the bank rate can try investing in bond funds. While money market (liquid) and gilt funds will also serve the purpose, bond funds offer far superior returns.

Bond funds invest mainly in bonds and debentures of corporates. They also invest in gilts and liquid securities like treasury bills, commercial paper (CP) and certificate of deposits (CDs). However, this constitutes a very small portion of their portfolio and is kept at hand to meet redemptions. Liquid funds invest mainly in the short term, liquid instruments mentioned above.

Open-ended, Liquid Schemes	NAV (Rs)	Last week	Last month	Last year	Since inception
Alliance Liquid (54EB Gr)	14.74	0.30%	-0.10%	12.70%	12.50%
Alliance Liquid (Reg.Gr)	14.83	0.30%	-0.10%	12.60%	12.70%
Alliance Liquid (54EA Gr)	14.83	0.30%	-0.10%	12.60%	12.70%
Tata Liquid (Reg)	11.43	0.10%	-0.10%	12.00%	11.30%
JM High Liquidity (Gr)	13.48	0.20%	0.60%	12.00%	12.80%
Alliance Liquid (54EB Div)	10.33	0.30%	-0.10%	11.70%	12.40%
Alliance Liquid (54EA Div)	10.3	0.20%	-0.20%	11.50%	12.30%
Alliance Liquid (Reg.Div)	10.31	0.20%	-0.20%	11.30%	12.30%

(We have only included liquid funds that have given over 11% returns over the last 12 months)

Bond funds are more attractive than other fixed income mutual funds like liquid and gilt funds. The latter invest in securities that are without any credit risk, however there is an interest risk associated with them. So an investor does not have to worry about any defaults, however he will have to comprise on the returns.

On the other hand, bond funds also have a credit risk in addition to an interest rate risk. And they try to reward investors by offering returns far superior to liquid or gilt funds. However, an investor can assess the credit risk profile of a bond fund by checking the credit ratings of the securities in the fund portfolio. A portfolio with a large number of securities with a credit rating of AA and above, indicates that the portfolio is relatively credit risk free.

Open-ended, Income Funds	NAV (Rs)	Last week	Last month	Last year	Since inception
K P Pension Plan (Gr)	16.15	0.80%	4.10%	17.20%	16.10%
LIC Bond Fund (Gr)	11.69	0.30%	1.10%	15.20%	15.10%
Deposit I-NIT 1997 (Plan B)	11.09	0.10%	0.50%	14.90%	6.40%
Escorts Inc. Plan (Gr)	13.18	0.30%	1.10%	14.20%	14.10%
Sundaram Bond Saver (App)	13.78	0.20%	-0.10%	13.40%	13.30%
Templeton Income (Gr)	15.31	0.20%	-0.10%	13.20%	13.70%
Deposit I-NIT 1997 (Plan 54EA)	11.76	-0.10%	-0.30%	13.10%	10.30%

(We have only included bond funds that have given over 13% returns over the last 12 months)

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