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Should I hold on to Birla SL Dynamic Bond Fund?

We recommend dynamic bond funds to debt mutual funds investors with an investment horizon of three to five years

I invested a lumpsum in Birla Sun Life Dynamic Bond Fund. The fund has been doing pretty poorly with negative returns (over 2 months). I understand that liquid funds, especially dynamic ones, don't offer assured return. But I expected them to do better. Is my choice of fund incorrect? Is there a better fund to invest?
- Praveen

We recommend dynamic bond funds to debt mutual fund investors with an investment horizon of three to five years. Hope you have invested with a similar investment horizon. There is nothing wrong with your fund selection. Birla Sun Life Dynamic Bond Fund is a four-star fund with an impressive track record. The fund has offered 8.09 per cent in the past year, 9.71 per cent in the last three years, 9.77 per cent in the last five years. You can continue with the fund.

A liquid fund differs greatly from a dynamic fund. A liquid fund invests in very short-term instruments. It is not volatile and a good choice to park money for a few days to weeks. A dynamic bond fund, on the other hand, is a slightly risky proposition as the fund manager invests in a variety of instruments entirely depending on his call on interest rates. It may face volatility in the short term, but has the potential to offer slightly better post-tax returns.

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