Sbi Dynamic Bond Fund: Worth Investing?

Dynamic bond funds are a class of debt mutual funds that adjust allocations between short-term and long-term bonds based on changing interest rates. The SBI Dynamic Bond Fund is a dynamic bond fund that has the flexibility to invest in bonds of any duration. The fund management team actively decides whether to invest in short-maturity bonds or those maturing several years later, depending on where it expects to earn maximum returns.

The fund's portfolio is largely conservative, with holdings mostly in Large Cap stocks and debt instruments. It has moderate risk and is suitable for investors who want to invest money for a longer duration but prefer less risky assets compared to equity funds.

The SBI Dynamic Bond Fund has an expense ratio of 1.43% and a minimum SIP amount of ₹500. It is important to note that investment in Regular Funds is no longer available, and investors are advised to switch to the Direct Plan of the same fund for higher returns.

How does the SBI Dynamic Bond Fund work?

The SBI Dynamic Bond Fund is a mutual fund that seeks to provide investors with attractive returns by investing in a portfolio of high-quality debt securities with varying maturities. As a dynamic bond fund, it has the flexibility to invest in bonds of any duration. The fund management team actively decides whether to invest in short-maturity bonds or those maturing several years later, depending on where they expect to earn maximum returns.

The fund's portfolio is largely conservative, with most holdings in Large Cap stocks and debt instruments. As of 31-Jul-2023, the fund had invested 82.46% in debt and 17.54% in cash and cash equivalents. The fund's Net Asset Value (NAV) is declared once daily, generally at the end of the day. As of 24-Aug-2023, the NAV of the SBI Dynamic Bond Fund was ₹30.9304. The fund's Assets Under Management (AUM) were ₹2,983 Cr as of 31-Jul-2023.

The SBI Dynamic Bond Fund has a moderate risk level, according to SEBI's Riskometer. It has delivered 5.95% returns since its inception 19 years ago. The minimum Systematic Investment Plan (SIP) amount for this fund is ₹500, and there is no lock-in period. The expense ratio of the fund is 1.43%.

The fund is suitable for investors who want to invest money for a longer duration but prefer less risky assets compared to equity funds.

What are the risks of investing in the SBI Dynamic Bond Fund?

When considering investing in the SBI Dynamic Bond Fund, it is important to be aware of the associated risks. Here are some key points to consider:

• Interest Rate Risk: The fund has a higher interest rate risk than the category average. This means that any changes in interest rates could severely impact your returns. If interest rates increase, the cost of the bond will decrease, and vice versa.
• Portfolio Management: The performance of the fund depends largely on the fund manager's decisions and their management of the portfolio. If the fund manager fails to adjust the portfolio as required or makes decisions contrary to expected interest rate movements, profits could be significantly impacted.
• Macroeconomic Factors: Factors such as oil prices, fiscal deficits, and changes in government policies can also affect the returns from dynamic bond funds.
• Volatility: Dynamic bond funds are subject to market volatility, and investors should be prepared for potential downturns. To mitigate this risk, it is recommended to stay invested for extended periods to minimise short-term risks.
• Investment Horizon: Dynamic bond funds are not suitable for short-term investments. Investors with a moderate risk appetite and an investment horizon of at least 3-5 years are better positioned to invest in these funds.
• Tax Incidence: Due to potential shifts in the interest cycle, dynamic bond funds may result in a higher tax incidence compared to other debt funds.
• Credit Risk: The fund has a moderate credit risk, which means there is a risk of default or failure by the issuer of the bond to make timely interest or principal payments.
• Liquidity Risk: There is a possibility that you may not be able to sell the bond immediately or at a desired price due to a lack of buyers in the market.

How does the SBI Dynamic Bond Fund compare to other funds?

The SBI Dynamic Bond Fund is a dynamic bond fund that provides investors with attractive returns by investing in a portfolio of high-quality debt securities with varying maturities. The fund management team actively decides whether to invest in short-term or long-term bonds based on expected returns.

Compared to other funds, the SBI Dynamic Bond Fund has delivered returns that are currently better than the category average. Its holdings are mostly in Large Cap stocks and debt instruments, indicating a conservative investment strategy. The fund's risk level is moderate, and it has a higher interest rate risk than the category average.

Some alternative funds to the SBI Dynamic Bond Fund include:

• Kotak Dynamic Bond Direct Growth
• Canara Robeco Dynamic Bond Fund Direct Plan Growth
• HSBC Dynamic Bond Fund Direct Plan Growth Option
• UTI Dynamic Bond Fund Direct Plan Growth Option
• Aditya Birla Sun Life Dynamic Bond Fund Direct Plan Growth
• Nippon India Dynamic Bond Fund - Direct Plan - Growth Option
• Axis Dynamic Bond Fund Direct Plan Growth Option
• ICICI Prudential All Seasons Bond Fund Direct Plan Growth
• Mirae Asset Dynamic Bond Fund Direct Growth

These alternative funds offer similar investment opportunities in dynamic bond funds, with varying levels of risk and return.

What are the historical returns of the SBI Dynamic Bond Fund?

The SBI Dynamic Bond Fund has seen varied returns over the years. As of 17 October 2024, the fund's latest NAV (Net Asset Value) was ₹34.1127. The fund's performance compared to other funds in the category is average.

As of 30 September 2024, the fund's portfolio included 13 debt holdings, with a modified duration of 8.79 years and a yield to maturity of 7.08%. The fund's performance has been moderately volatile, with a standard deviation value indicating some variability in returns over the past three years.

Over the past year, the fund has delivered returns of 10.94%. Looking at longer time horizons, the fund has returned 24.19% over three years and 158.22% since its launch 19 and a half years ago.

The SBI Dynamic Bond Fund has a moderate risk profile and is suitable for investors who want to invest for the long term but prefer less risky assets compared to equity funds.

How do I invest in the SBI Dynamic Bond Fund?

The SBI Dynamic Bond Fund is a mutual fund that can be purchased directly from the SBI Mutual Fund website. Alternatively, you can buy mutual funds through platforms like MF Central and MF Utility. If you are uncomfortable buying mutual funds online, you can seek help from a mutual fund distributor, such as a bank.

The minimum SIP amount for the SBI Dynamic Bond Fund is ₹500, and there is no lock-in period. The expense ratio is 1.43% or 0.62% depending on the source. The latest NAV as of 17 Oct 2024 is ₹37.11.

Frequently asked questions