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Benefiting from Falling Rates

Dynamic bond funds are best placed to benefit from falling interest rates. Find out more…

I want to invest in debt funds for about 1 to 2 years. I have shortlisted Birla Sun Life Dynamic Bond Retail, SBI Dynamic Bond and IDFC SSI Investment. Which is the best option?
-DS Malik

These are three different kinds of funds that you've shortlisted: dynamic bond funds, short-term bond funds and FMPs. For your investment timeframe, dynamic bond funds would be the best option. These funds are best placed to capitalize on any fall in interest rates. On the other hand, FMPs are insulated from interest rate changes and would be a good choice if you're seeking predictable returns. The third option, short-term bond funds, tend to suffer during a falling interest rate scenario.

This article was originally published on October 11, 2012.

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