Dynamic bond funds are debt funds that ‘dynamically’ manage the lending duration. These funds are constructed in a way that allows fund managers to use interest rates movements in the economy as an opportunity to generate higher returns. This is done by increasing or reducing the lending duration depending on whether the interest rates are heading down or up.
The dynamic bond funds are ideal for investors who are not experts in making the right calls based on the interest rate movement. Investors with moderate risk appetite and investment horizon of 3-5 years should invest in these funds.
The minimum investment varies from scheme to scheme. It could range between Rs.100/ – to Rs.5,000/-.
> If an investor has made an investment in a debt mutual fund and withdraws the amount before 3 years of investment, Short Term Capital Gains Tax would be levied, as per the income tax slab of the investor.
> If an investor withdraws the investment including capital gains post 3 years of investment, 20% Long Term Capital Gains Tax of 20% is levied, with the benefit of indexation.