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Aditya Birla Capital LimitedAditya Birla Capital Limited (“ABCL”) is a listed systemically important non-deposit taking Non-Banking Financial Company (NBFC) and the holding company of the financial services businesses. ABCL and its subsidiaries/JVs provides a comprehensive suite of financial solutions across Loans, Investments, Insurance, and Payments to serve the diverse needs of customers across their lifecycles. Powered by over 61,600 employees, the businesses of ABCL have a nationwide reach with over 1,690 branches and more than 200,000 agents/channel partners along with several bank partners.
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What is a Dynamic Bond Fund?
A Dynamic Bond Fund is a debt mutual fund that invests in debt instruments across different durations. The portfolio can invest in any duration, depending on market movements.
Advantages of Dynamic Bond Funds
Good returns
These funds invest across duration and the choice of securities change with changing interest rates. This helps in generating good returns.
Stability
The returns are stable since these funds invest in debt instruments which are not exposed to volatility risks
Diversified portfolio
You get an actively managed, diversified portfolio that invests in high-quality bonds and also switches investments to sync with interest rate movements.
Adaptable to Market Conditions
Their flexible investment approach allows them to strategically adjust holdings, aiming for favourable returns regardless of shifting interest rate trends and economic landscapes.
Explore Dynamic Bond Funds
Most Popular
AUM: 23427(Cr)
Risk: Very High
- MIN. INVESTMENT 500
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹10000
- Get (30 Yrs) ₹24,850*
*Projections/estimations is backtested using historical data.
Most Popular
- AUM: 23427(Cr)
- Risk: High
- MIN. INVESTMENT 1000
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹15000
- Get (30 Yrs) ₹34,850*
*Projections/estimations is backtested using historical data.
Dynamic Bond Funds Returns Calculator
REGULAR INVESTMENT
SIP
Invest systematically in regular amounts and build a corpus with a disciplined investing habit.
START SIPONE TIME INVESTMENT
Lump sum
Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.
INVEST LUMPSUMTotal Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
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Understanding Dynamic Bond Funds
Table of Contents
What are Dynamic Bond Funds?
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A type of open-ended debt mutual fund , Dynamic Bond Funds are those that invest in bond of differing durations. The funds have the flexibility of switching between short and long-term bonds depending on interest rate movements. Thus, the funds aim to provide good returns and minimise credit risk.
What are the features of dynamic bond mutual funds?
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Offers stable returns on investment
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Flexibility to own differing duration securities minimises interest rate risk
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There’s no capping on the maximum investment amount
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You can get better returns compared to fixed deposits
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The funds aim to grow the portfolio through interest earned and also through the rise in the price of the underlying securities
Things to keep in mind when investing in Dynamic Bond Funds
Check the expense ratio of such schemes. A high ratio eats into the fund’s returns and should be avoided
Compare Dynamic Bond Funds on their returns. A fund with the highest return is better
Check the fund manager’s performance in the past to see if the fund was managed when interest rates were changing
What are the types of risks that Dynamic Bond Funds face?
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Credit risk
Risk of default on the debt instrument
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Interest rate risk
Risk of rising interest rates, which reduces the value of debt instruments
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Inflation risk
Risk of inflation reducing the returns from the debt fund
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Liquidity risk
Risk of not being able to trade in debt instruments
What is the tax implication of Dynamic Bond Funds?
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Returns earned are taxed at your income tax slab rates
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Dividends earned, if any, are taxed at your income tax slab rate
What are the payout options?
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Dividend option
Earn dividends on your investment at regular intervals
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Growth option
Accumulate the returns over the investment tenure and get a lump sum amount on redemption
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FAQs On Dynamic Bond Funds
Dynamic Bond Funds are basically debt funds in which fund managers have the flexibility to select the portfolio duration. This helps in situations such as interest rate fluctuations. For example, when interest rates are expected to increase, the fund manager can add investments to short-tenure debt securities since they are less impacted by interest rate risks.
Dynamic Bond Funds give managers the opportunity to move the investment duration around as per interest rate fluctuation predictions. For example, the manager can buy a greater number of short-term and medium-term instruments and reduce gilt holdings. They could also increase the investment in high-rated corporate bonds, aiming at high accrual income.
Dynamic Bond Funds invest majorly in bonds (government, municipal, corporate, convertible) and other debt instruments, such as mortgage-backed securities (MBS).
Since Dynamic Bond Funds are medium-level-risk funds, new investors should invest in them only if their risk appetite matches.
Dynamic Bond Funds are moderately risky. So if you decide to invest in one, make sure that you are aware of the risk-reward ratio.
You should invest in a dynamic bond fund with a running period of at least 5 years, so that you have an idea about its historical performance and more before investing.
Yes, investing in Dynamic Bond Funds through SIP is relatively better as it helps you tackle the instability of fluctuating interest rates.
Just like any other debt fund, Dynamic Bond Funds are taxed as capital gains. In case of up to three years of holding (short term capital gain), redemption is taxed as per applicable tax slabs. In case of 3+ years of holding (long term capital gain), the tax rate is 20%.
Dynamic Bond Funds’ biggest advantage is duration strategy. Other funds cannot alternate between short duration and long duration for their investment instruments as when requested. This helps Dynamic Bond Funds deal with interest rate risks, macroeconomic factor risks, and other risks.
Dynamic Bond Funds, as the name suggests, work in a very dynamic way. Fund managers can make or break your investments, which is a unique risk and advantage factor. Otherwise, Dynamic Bond Funds face similar risks as other debt funds, such as interest rate risk and liquidity risk.
If you are ready with a decent risk tolerance, Dynamic Bond Funds can be potentially more beneficial for you than FDs. With FDs, your returns remain fixed from the time of investment until maturity. In case of dynamic fund bonds, market change-led portfolio allocation movements can lead to higher returns.
Corporate bond funds are debt funds characterised by their minimum 80% allocation to corporate bonds. Dynamic Bond Funds can invest in corporate bonds as well as government bonds, and make it possible for you to keep readjusting your allocations as per expected market movements. This feature is not found in corporate bonds.
Balanced funds and dynamic funds have quite a few similarities, in terms of their investments being a mix of equity and debt funds. Dynamic Bond Funds are slightly more aggressive and fluid versions of balanced funds, in that their portfolio allocations can be readjusted multiple times as per market movements.
The fund’s past performance is a key factor while deciding upon a Dynamic Bond Fund investment. The core of the fund lies in how it is managed and reallocated as per the times. Thus, a 5-year fund performance history can assure or alert you about the management of the fund.
Other than this, the usual factors such as investment horizon, financial goals, and risk tolerance come into play.
Macroeconomic factors such as currency movements and government transformations affect interest rates, which in turn impact Dynamic Bond Fund values.
Your fund manager’s strategy with regards to reallocation as per market movements decides the amount of risk and also the amount of return potential that your investments are exposed to.
Rising and falling interest rates decide the fund manager’s strategy with your Dynamic Bond Funds. They can invest and reinvest instruments across short-term and long-term ones as per the expected movements in interest rates.
Types of Debt Funds
Funds Based On Duration
Funds Based On Portfolio Allocation
Other asset class funds
Equity Fund
Give your savings the growth they deserve. Invest in Equity Funds and unlock the potential of long-term growth
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Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
Hybrid Funds
Get a mix of equity, debt and other asset classes for a diversified portfolio
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Index Fund
Passively-managed mutual funds tracking a particular index
Know More
ETF Funds
Invest in funds listed and traded on the stock exchange