Debt: Dynamic Bond

What is it?

Dynamic bond debt funds invest in debt instruments with different maturities. These funds do not have the obligation of investing in the debt securities of a particular maturity. So, they can benefit from changing interest rate scenarios.

Objective

The primary objective of these funds is to provide decent returns in both rising and falling interest rate environments.

Suitability and opinion

These funds can be a suitable option for investors who are willing to take on moderate risk for the potential of higher returns, and who have a good understanding of interest rate movements and economic cycles. The ideal time duration for these funds is 3 years and more. However, it is important to note that Debt Dynamic Bond funds can be volatile and may be affected by credit risk and interest rate risk. We believe that investors can avoid this category as bonds with different tenures can increase complexity in fund management and lead to underperformance. Investors can prefer short-duration debt funds over this category.