If you are confused about all the talk about interest rate pauses and likely cuts, you should consider investing in dynamic bond funds. Dynamic bond funds have the freedom to invest across securities and maturities depending on the outlook of the fund manager. So, when the rates go up, the fund manager might bet on short term securities as a rate hike will marginally impact them. When rates start falling, he will invest in long-term instruments to make money.
However, this does not mean that these schemes are sure-shot winners. There have been instances where fund managers have wrongly guessed RBI actions and suffered losses. In fact, dynamic funds lost their charm after these schemes were hit by a bad money market and the lack of firm cues on interest rates in 2019. However, at least in theory, it makes sense to get a professional to take a call on interest rates. Especially at a time central banks across the globe are waiting to see definite downward trend in inflation before reducing interest rates.
