Superior returns from fixed income | Value Research Dynamic bond funds have the leeway to invest in short-term or long-term securities, depending on the interest rate outlook
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Superior returns from fixed income

Dynamic bond funds have the leeway to invest in short-term or long-term securities, depending on the interest rate outlook

How is SBI Dynamic Bond fund? Should we continue investing in this fund considering its performance has come down?
-Ramanand

Dynamic bond funds, also known as flexi debt funds, can hold papers of any maturity depending on the interest rate outlook. These funds suffered losses in June this year because of a sudden interest rate hike. RBI's move surprised every fixed income investor because everybody was expecting an interest rate cut, fund at that point dynamic bond funds were holding long maturity papers.

But if you have a timeframe of more than a year, continue to hold on because a good amount of that loss has been recovered and many of these funds have also changed their character in terms of the portfolio profile.

These funds are meant for investors looking for superior returns in a one or two year timeframe. So yes, they have suffered in the last two-three months but if you have a slightly longer timeframe in mind, you need not worry. You should consider pulling out your money only if you foresee a need anytime soon.




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