3 weeks ago
Dynamic bond funds balance risk and returns, experts advise
Sometimes banks and big companies need money to grow, so they borrow it and give back a promise called a bond.
When you buy a bond fund, many people put their money together and lend it out through these promises.
The Reserve Bank of India, the country's money boss, said it is keeping its money rules the same for now.
Because of that, money experts say it is a good time to spread your bond money around instead of putting it all in one place.
Short-term money market funds are like a safe piggy bank, because you can get your money back very quickly.
Long-term target maturity funds are like planting a tree that grows steadily and pays you year after year.
Dynamic bond funds are special because an expert moves your money between short and long bonds as conditions change.
Experts call this the barbell approach, because you hold weights on both ends and skip the middle.
This way, people can earn more from their savings without taking too much risk.
The Reserve Bank of India (RBI) has retained its neutral policy stance, prompting a balanced approach to fixed income.
Dynamic bond funds let fund managers shift across short, medium, and long durations based on interest-rate views.
Money market and liquid funds are recommended for short-term money, offering T+1 liquidity and capital preservation.
Target maturity funds, holding government securities and AAA public sector bonds until maturity, suit long-term horizons.
Experts suggest a barbell strategy of short- and long-term bonds to exploit curve steepness ahead of foreign currency non-resident flows.
- Who
- Indian fixed-income investors, guided by advice from fund managers including Sandeep Yadav (DSP Mutual Fund), Sneha Pandey (Quantum AMC), Puneet Pal (PGIM India Mutual Fund), and Sonam Srivastava (Wright Research PMS).
- What
- Recommendations on choosing dynamic bond funds, money market funds, and target maturity funds to balance risk and returns.
- Where
- India
- When
- Currently, following the Reserve Bank of India's decision to retain its neutral policy stance.
- Why
- To help investors balance risks and returns amid a neutral RBI stance, attractive short-term yields, and anticipated foreign currency non-resident flows.
Key facts
- RBI policy stance
- Neutral
- Short-term option
- Money market and liquid funds with T+1 liquidity
- Long-term option
- Target maturity funds (average maturity of one to 10 years)
- Balanced option
- Dynamic bond funds, which may outperform other thematic debt funds over 4-5 years
- Recommended strategy
- Barbell approach: short and long maturities, avoiding medium-term bonds
- Extra yield on AAA public sector bonds
- 50-70 basis points over similar government securities
- Issuers mentioned
- Rural Electrification Corporation and National Highways Authority of India
Quotes
Sandeep Yadav
Head of Fixed Income, DSP Mutual Fund
“"A barbell strategy could be beneficial for investors as they can take advantage of the steepness in the curve which has currently happened in anticipation of foreign currency non-resident flows."”
financialexpress.com
“"It is the same philosophy, minus the execution burden on the investor and is tax‑efficient as well."”
financialexpress.com










