SBI Dynamic Fund

POSTED BY Pallavi ON March 3, 2012 2:03 pm COMMENTS (14)

Dear All,

How is SBI Dynamic Fund?

I intend to keep my emergency fund in this fund…and also as a part of my overall debt portfolio? (I already have a PPF)

Should I invest as Lumpsum or SIP?

Given that interest rates are going to decrease, does it make sense to invest in this OR should I keep the contingency fund in FDs (in my mother’s name who do not have source of income and hence no tax liability)?

Please can you clarify my queries?

14 replies on this article “SBI Dynamic Fund”

  1. Pallavi says:

    Thank you Ashal and all for the response.

    So to conclude:
    3 months expense in FD with Auto Sweep
    3 months expense in HDFC High Interest short Term plan ( I guess Monthly dividend as I am in 20% bracket)

    One more query:
    I already have PPF account so I am not sure, if I need to go for Debt Fund?

    1. Dear Pallavi, I w’d ask to invest in to growth option. In case of dividend, if you are not redeeming within a year, your actual return ‘ll be lower due to impact of dividend distribution tax.
      On the other hand, in growth option your actual return ‘ll be higher for more than 1Y holding.

      Thanks

      Ashal

    2. Dear Pallavi, please take stock of your over all situation & then decide how much debt component you want to keep in your portfolio & accordingly if need arise, go for higher or lower debt component. Accordingly you may invest in debt funds.

      Thanks

      Ashal

  2. Pallavi says:

    Thanks to all for your response.

    @Ashal – I have a FD along with Auto Sweep.

    Then when should one go for SBI Dynamic Bond Fund.

    1. Dear Pallavi, First of all please try to keep around 3-4 months expenses amount in to that Sweeping FD account. Anything more than this should diverted to liquid or short term funds.

      One such fund is HDFC High Interest short Term plan.

      When 6+ month expenses amount is already with you in sweeping FDs & these funds, you may invest in other debt funds as per your over all portfolio position & the allocation meant for debt funds.

      Thanks

      Ashal

  3. Anand says:

    How about Fidelity Cash Fund, for emergency purpose?
    It has no entry load and no exit load, plus you get money in 24 hours, after putting redemption request. You also get more than 8% interest.

    1. Should be fine. Opt for a Monthly dividend if you are in 20% or 30% tax bracket.

  4. This Bond fund, apart from being sensitive to interest rates, also has an exit load if redeemed before 270 days – both these make this scheme a no-no for emergency purposes.

  5. Dear Pallavi, do you have any bank FDs or sweeping FD account?

    Please update.

    Thanks

    Ashal

  6. Abhishek says:

    Hi Pallavi,

    this is not the fund u r lookin for. this is income fund and sensitive to interest rates.

    Go for Idfc money manager fund treasury plan which is a liquid plus fund.

    regards
    abhishek

  7. Pallavi says:

    Thanks for your response. It is SBI Dynamic Bond fund.

    I am not sure how to use Liquid and Debt fund combination as I could not understand it from the attached link. It would be great if it is explained more clearly 🙁

    I am new to all these stuff and hence so many queries.

    1. rmohan80@gmail.com says:

      Hi Pallavi,

      No issues with asking many questions, we’re all here to help and to learn at the same time 🙂

      Here is what you should do in my opinion

      1) Calculate 6 months of your monthly expenses — ok, monthly expenses means things like rent, EMIs and general stuff to keep your life running. Typically when you start using the emergency fund, you need to hunker down. So no fancy dinners or shoes 🙂 or even investments till you get on your feet again

      2) Put about 3 months into a good liquid fund. Liquid fund means you can get your money in 1 business day. I would suggest Principal Cash Mangement or HDFC Cash Management

      http://www.moneycontrol.com/mutual-funds/nav/Principal-Cash-Management/MID086
      http://www.moneycontrol.com/mutual-funds/nav/HDFC-Cash-MgmtSP/MZU006

      3) Put the 3 months reminder in either fixed deposits or just keep in your savings account or if you have appetite for risk, put in any ultra short term debt fund. Don’t go in for long term debt fund as that means you have to wait for a few years to be sure that your investment is in loss.

      I suggest here Birla SL ultra short term Fund

      http://www.moneycontrol.com/mutual-funds/nav/Birla-SL-Ultra-Short-Term-RP/MAC029

      Don’t worry about Liquid plus, those are higher risk and more suited for institutions rather than individual investors.

      I assume you already have a good health insurance apart from the one that your company provides for your entire family. That way the emergency fund will be used only when you lose your job or something like that. If not, get one asap. I cannot stress enough the importance of it

      You can do a lumpsum in both the Liquid and Debt funds. Usually it is better to do lumpsum rather than SIP in these funds. If you look at the links I’ve provided usually the NAV keeps going up, so if you invest in SIP you are actually losing out on investing at a lower price.

      Hope this helps, please get back with more questions if you need more clarifications

      Thanks,

      Ram

  8. rmohan80@gmail.com says:

    What is SBI Dynamic Fund? I couldn’t find it…Are you talking about SBI Dynamic Bond Fund? It’s a debt fund and can be part of your overall debt/emergency fund.

    Note that debt funds take 2 days to liquidate, so worst case if there are market holidays/weekends, it may take 3 or 4 days for the money to come into your account.

    May I suggest a combination of Liquid fund and Debt fund for emergencies. Please see the thread that I opened and some interesting discussion around that @ http://localhost/jagoforum2/contingency-fund-liquid-fund/

  9. Pallavi says:

    Adding to the above:
    Is it a liquid or liquid plus fund. (I heard liquid plus fund is better to park emergency fund)?

    Should I opt for growth or dividend option?

    Also, is it advisable to use this to park any surplus cash?

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