Sit back, and let dynamic bond fund tackle duration risk for you

Risk in these funds arises from the fact that even fund managers' interest-rate calls could take a wrong turn

Among debt funds, the category that enjoys the mandate to invest anywhere is the dynamic bond fund. It can invest in high- or low-duration bonds, or in high- or low-credit quality papers. 

With interest rates likely to harden, investors who are not sure about which debt fund category to invest in for a slightly longer time horizon can consider dynamic bond funds, a category with assets under management (AUM) of Rs 25,611 crore at the end of June.  
 

Rates could harden

Fund managers feel interest rates could rise. “We believe interest rates have bottomed out and could gradually head higher,”