REMEDY TO INCREASING REPO RATE: INVEST IN ALL SEASON BOND FUNDS FOR HIGHER RETURN THAN BANK SAVINGS

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REMEDY TO INCREASING REPO RATE: INVEST IN ALL SEASON BOND FUNDS FOR HIGHER RETURN THAN BANK SAVINGS

At the worldwide level, inflation has been a problem for the past about 1.5 years. Many nations continue to experience high levels of inflation. Central banks all across the world are raising interest rates on debt in an effort to curb inflation. This has also had an impact on the RBI of India. Last week, the RBI raised the repo rate by 25 basis points. The RBI repo rate has raised to 6.50% as a result of this increase. Since May 2022, the RBI has raised the repo rate by 250 basis points, or 2.25%. As a result, even while the interest rate on bank deposits is still low, the interest rate on loans has increased. The rate of inflation is still hovering around the RBI’s 6% ceiling. Nothing concerning the future can be spoken in this circumstance. The majority of experts advise investing in Dynamic Bond Funds in light of the current unpredictability. A subset of debt mutual funds called dynamic bond funds makes investments in both debt and money market securities. This comprises different tenors of corporate bonds as well as government securities. There are no constraints on tenure or maturity for dynamic bond funds. Depending on the interest rate environment, fund managers will invest for a variety of time periods. Due to various interest rate situations, dynamic debt funds have the ability to produce better returns despite being more volatile than short- and medium-term debt funds. Potential profits of up to 10% exist. Also known as All Season Bond Funds, these. According to experts, there are a lot of schemes in this area. The best in this is ICICI Prudential All Season Bond Fund, which has a successful track record spanning more than ten years and is also the largest plan in terms of assets in this category. The plan lengthens the time frame during which an increase in interest rates is anticipated to have decreasing benefits. It shortens the time frame during which rises in interest rates are anticipated to lower the danger of market losses. It can be said that even during periods of low interest, all-season bond funds provide greater returns than bank savings.

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