“Can I invest in a Dynamic Bond fund? They seem to be giving good returns.” my friend asked me.
My friend’s investment thinking starts at returns and ends there. It is time to enlighten a bit.
What are Dynamic Bond Funds?
Dynamic bond funds are a unique category of debt funds, where the intention is to make money in several ways. The primary strategy of course is to understand and anticipate interest rate movements in the market and position the portfolio to benefit from it.
It also includes active trading of holdings so as to capture gains that may be available in a very short window of time.
Apart from that, these funds invest across opportunities and time frames such as Govt. bonds, corporate debt, money market covering the entire interest rate spectrum of long, medium and short term.
However, not everything is rosy. They have their own share of volatility…. [Continue Reading]