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Friday, June 14, 2013

Investing in Bonds Funds- A wise idea?

As the equity markets are volatile and the economic scenario is too turbulent, people are looking at safe investments avenues. The first thing that comes to mind for an investor is bank fixed deposits. But with the interest rate scenario looking downward, the best instrument for investment for safe and secure returns is Dynamic bond funds.
What is dynamic bond fund?
Dynamic bond fund can be an alternative for fixed deposits.  The investment pattern of this type of schemes is into AAA/AA rated papers and p1 deposits. These funds are inversely related with interest rates. As the interest rates are reduced, the returns generated by these funds increase and vice versa. These funds have generated around 14% returns in the last 1 year. The investment horizon for these funds should be anywhere between 1-3years. These funds can be advised to clients who look for safe investment and returns more than the bank fixed deposits. But these funds too come with risks. Risk of investment( junk bonds) etc.
Customers who look to invest in these type of schemes should first take a proper advice from their financial advisors about the track of the fund managers, and also the schemes previous performance.
Note: The views expressed are in general and readers are advised to consult their respective advisors before investing.

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