The last eight Quarters we have witnessed a considerable rise in Interest rates in
the country which was primarily to curb inflation.With Inflation coming under
better control the next few Quarters are expected to see a fall in Interest Rates being
offered .As it shows an inverse proposition to Bond Yields,Bond Funds are expected
to perform better giving a probable return of 12% or more.
Wealthbasket.co recommends to its investors actively managed Dynamic Bond Funds
where a proactive call is taken on Interest Rate Scenario. When the Interest rates are
expected to fall in the near future long tenure Debt papers would be accumulated
where the fund would be positioned at the shorter end of the curve with expectations
of a rising interest rate scenario.
If we consider FMP's (Fixed Maturity Plans) they have to invest for a specific period
and lock in the Interest Rate thus any maturity modification is ruled out.Short term
Funds have a maturity of 6 months to 2 years and Income funds have a maturity of
4 years plus.Dynamic Bond Funds fill the gap between the above two categories
by not having a fixed maturity period and the maturity period can be changed
hence taking advantage of rising or falling Interest rate scenarios.Movement of
Funds between short term papers like CP's and CD's or to long term papers such as
Corporate Bonds and Governament Securities is possible.
Dynamic Bond Funds are ideal for Investors during this high volatile market
conditions and a scenario of changing Interest rates where a better return than
conventional Fixed Deposits is expected .
Wealthbasket.co
No comments:
Post a Comment