I am a senior citizen. I had invested in SBI Dynamic Bond Fund last year. Just after I had invested the interest rates began to increase. Today the returns are as low as 2 per cent. I would have got 9.5 per cent from a bank fixed deposit, what should be my strategy now?
John
Most investors, who came into debt funds in the first quarter of 2013, were expecting a rate cut. All fixed income investors were brought into these dynamic bond funds anticipating that rates will go down and they will benefit. But everybody was caught on the wrong foot, including the fund managers. That is something which can happen again, after that we have seen another rate cut. If you have time on your side and you can hold for two more years, hopefully the rate cut cycle will begin and you will benefit from that. If you cannot withstand this kind of low returns in coming months, then it will be worthwhile to move into something which is fixed income and is yielding high returns. If you really want to have consistent performance from your investments you should not be investing into these funds.
This article was originally published on March 12, 2014.
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