The benefits of investing in dynamic bond funds

Most investors are clueless about the many advantages that dynamic bond funds offer over other income funds.

In a confusing economic environment, investors are often left wondering about the kind of financial products they should invest in. The most important question to answer is whether one should invest in short-term or long-term funds.

Currently, it is a wiser move to consider ‘dynamic bonds’. In this context, you could consider the Birla Sun Life Dynamic Bond Fund (BSL Dynamic Bond).

- Why invest in dynamic bonds?

A dynamic bond is a debt fund that, as the name suggests, can change as per changes in interest rate movements. The investor’s fund manager can choose the duration of the bond depending on his analysis of the prevailing interest rates. If rates are about to fall, the manager will invest in long-term instruments. Conversely, he may invest a bulk of the investor’s money in short-term products if the rates are likely to rise.

- Why are they advantageous?

Since they can be aligned to suit the investor as per the rate movements, a dynamic bond offers greater returns than static bonds. They insulate the investor from the rise or fall of interest rates because they can be repositioned as per the changing rates. The BSL Dynamic Bond helps you benefit in both cases – when interest rates fall or rise.

- When should you invest in dynamic bonds?

When the situation of debt markets remains in a state of flux or follows a downward trajectory, a dynamic bond fund is the safest investment option. In a situation of high inflation and stagnant interest rates, it can be invested in short term maturity bonds. Conversely, in a sluggish market, it can be invested for long term Government securities, for example. The BSL Dynamic Bond helps those who want to earn an income with capital growth over the short term

- Why are they better than traditional debt funds?

Traditional debt funds require a sense of accuracy on the part of the investor. He must commit to investing by deciding on the future rate trends. This is not seen in a dynamic bond fund, where the investor does not need to juggle with interest rate volatility. However, BSL Dynamic Bond cautions investors that their money is at moderate risk.

- Which dynamic bond fund should you consider?

The Birla Sun Dynamic Bond Fund is an open ended regular income product that invests your money in Government securities, corporate bonds and structured credit instruments. The product invests only in high quality corporate bonds and Government securities. Also you can redeem your money at any time on furnishing a redeem request to the company.

How the Birla Sun Life MNC Fund Can Help Achieve Your Goals

The Birla Sun Life MNC Fund can help you to achieve a variety of financial goals. The fund helps to grow your savings over the long term by investing in the stocks of multinational companies that show strong and growing revenues and profits, have manageable debt levels, are a market leader for their products, operate a stable business model and have good management teams. The fund has far out-performed its peers and the benchmark CNX Index. Thus, the Birla Sun Life MNC Fund can clearly help you to achieve your financial, given its strong performance and portfolio.

Top Three Things You Should Consider

1. Saving for long-term goals --- The Birla Sun Life MNC Fund is ideal for long-term goals, as one of the aims of its fund manages is You can build up a good corpus for long-term goals such as putting together the down payment on you dream house, or saving enough to buy a car or some other gadget without having to take loans, or for the purpose of saving for retirement. Any long-term saving must give returns that help you to overcome inflation; the MNC Fund is a good bet given its high returns of 24.42% (compound annual growth rate, or CAGR) since inception. By contrast, the benchmark CNX MNC Index gave a CAGR of a lower 16.34%. When saving for the long-term, it is a good time to invest via the systematic investment plan, or SIP route. You can invest a certain fixed sum every month; this way, you don’t need to commit a large sum of money right away, and you bring discipline to your financial planning. 
2. Saving for your children’s education or marriage --- If you want to be able to send your child to the US or to Europe for higher studies, without having to depend on a scholarship, you will need a sizable corpus (remember that the cost of education should include living expenses and expenses on books and transport). Similarly, if you wish to splash out on your daughter or son’s wedding, you should start building your nest egg from today.
3.  Parking unexpected or one-time awards such as a large bonus, or a gift from a relative. You could invest the large bonus or monetary gift that you received as a lump sum into the Birla Sun Life MNC Fund. You can then remain invested in this fund and opt for a systematic withdrawal plan or SWP some years down the line, when you need to supplement your income.