इस सप्ताह की फाइनेंशियल टर्म- डायनामिक एसेट एलोकेशन फंड
While wealth creation may be one of your goals as an investor, another goal in your list would probably also be that of wealth protection. The balance between creation and protection can be achieved by adopting the right asset allocation strategy I n your portfolio. Asset allocation is the process of allocating your money to different asset classes according to your financial goals, risk appetite, and investment horizons. The different types of asset classes can be equity, debt, gold, real-estate and so on; and each of these has a varying degree of risk associated with it.
Also, asset allocation can be a continuous process. As the markets move up and down, your asset allocation may change or may need to change in order to create wealth, but at the same time, you may or may not have the market expertise to protect your wealth parallelly. A dynamic asset allocation fund is an all-weather fund that rebalances its own portfolio between equity and debt based on the prevailing market condition. The fund manager of a dynamic asset allocation or a balanced advantage fund has the flexibility to vary the percentage of investment in equity or debt.
What is Dynamic Asset Allocation Fund?
A dynamic asset allocation mutual fund can be considered as an “all-weather” mutual fund and investment vehicle. Essentially dynamic asset allocation mutual funds rebalance their own portfolio between equity and debt according to ongoing market conditions. The fund managers at dynamic asset allocation funds, also referred to as "balanced advantage funds”, have certain flexibilities. The key flexibility here is asset allocation. Dynamic asset allocation mutual funds can hold major portion of investment in Equity with decent amount of exposure towards debt which can act as cushion.
डायनामिक एसेट एलोकेशन फंड कैसे काम करता है?
A lot of investors tend to buy when the market is high/more expensive and sell when it’s low and vice versa. Dynamic asset allocation fund encourages a dynamic allocation of capital, in equity or debt asset class, to investors. For example, when the market is low, the fund may maintain a higher equity allocation & shift higher allocation to debt category when the markets are unfavourable.
स्पष्ट रूप से, इसके लिए फंड मैनेजर द्वारा निरंतर भागीदारी और मार्केट की निगरानी की आवश्यकता होती है.
डायनेमिक एसेट एलोकेशन फंड, आपके ऊपर से सही एसेट चुनने के दबाव को कम करता है और अपेक्षाकृत बेहतर रिटर्न प्राप्त करने के उद्देश्य से मार्केट के साथ तालमेल बिठाता है
Purpose of dynamic asset allocation funds
There are a few easy and straightforward purposes of dynamic asset allocation funds. They can benefit a wide variety of investors by being a part of their portfolio. The 3 key benefits of dynamic asset allocation mutual funds are:
1 Each dynamic asset allocation mutual fund offers expert mutual fund managers who are in touch with the market and read it in a systematic and professional way.
2 Outside of thinking about asset allocation correctly, often moving money around funds requires involvement and transactions. Such transactions are liable to capital gains tax. However, when you’re invested in a dynamic asset allocation mutual funds, as long as you stay invested, your money is re-allocated to assets without a tax requirement from you.
3 You can hedge your bets across market conditions through dynamic asset allocation mutual funds. This way, your fund manager allocates your money to debt when the equity market isn’t priced right and moves your money into equities when prices become more attractive, all while keeping their assets under management (AUM) hedged for the market conditions.
डायनामिक एसेट एलोकेशन फंड में किसे इन्वेस्ट करना चाहिए?
जोखिम से बचने और पहली बार इक्विटी निवेश में प्रवेश करने वाले निवेशक या पहली बार म्यूचुअल फंड में निवेश करने वाले निवेशक के लिए यह फंड आदर्श है. ऐसे संभावित निवेशकों के लिए भी यह आदर्श है, जो मार्केट से जुड़ना चाहते हैं, लेकिन उन्हें मार्केट के तौर-तरीकों की समझ नहीं है या उसके पास उन तौर-तरीकों को समझने का समय नहीं है.
डायनामिक एसेट एलोकेशन फंड के लाभ
1 No additional costs -
If you were to allocate asset manually, you might find it expensive to exit certain schemes while rebalancing your portfolio owing to exit loads and capital gains tax. However, dynamic asset allocation funds do this for you without the need for expertise or any additional costs.
2 Risk-adjusted returns -
This fund can provide you with a smoother sail across the investing universe by offerings returns that are risk-adjusted and can fight volatility.
3 Dynamic taxation -
In the case the allocation to equity is 65% and above, the fund qualifies as an equity-oriented fund, tax treatment will be similar to that of equity-oriented fund. In the case the allocation to equity is below 65%, the fund does not qualify as an equity-oriented fund, tax treatment will be similar to that of funds other than equity-oriented funds.
How to invest in dynamic asset allocation fund?
Investing in dynamic asset allocation mutual funds is a simple process and can be done online. However, before you invest in your pick for the most suitable or best dynamic asset allocation fund it is important to consider your own allocation to it in your portfolio.
Although a dynamic asset allocation fund is naturally primed to factor in market conditions, it is still best to invest your money through SIP as an additional layer of protection and rupee cost averaging for your capital.
Once you pick from dynamic asset allocation fund, you can invest in it online - whether through a broker, distributor, or directly with the asset management company (AMC) itself.
निष्कर्ष
Dynamic asset allocation mutual funds are an investment instrument that balances equity and debt in its portfolio according to its strategy for varying market conditions. Also called a balanced advantage fund, it is a structurally hedged product with the freedom to invest in different asset classes as the fund manager deems appropriate for current market conditions.
Dynamic asset allocation funds can help your portfolio by balancing equity and debt in a single fund, without the burden of market monitoring, undertaking transactions, or capital gains tax on portfolio rebalancing. One of the best way to invest in a dynamic asset allocation fund can be to SIP.
अक्सर पूछे जाने वाले प्रश्न
What is a dynamic asset allocation mutual fund?
A dynamic asset allocation mutual fund, also known as a Balanced Advantage fund, is a diversified mutual fund that invests across Equity & Debt. It is an inherently hedged instrument and allows an investor to have a lower risk profile and ensures a reduced degree of volatility compared to a full equity fund or a debt fund.
Under this category of funds, the asset manager has the discretion to decide how much to invest in each asset class depending on their strategy to tackle market conditions.
Is dynamic asset allocation fund debt or equity?
A dynamic asset allocation fund is defined by its flexibility of movement across asset classes. As such, it can invest in debt or equity and equity related securities, or even REIT’s or InvIT’s. Depending on the composition of how the assets under management are invested over the duration of your holding, or even during the period of your sale, shall differ and affect taxation accordingly.
How does a dynamic asset allocation fund compare to a multi asset fund?
By Securities and Exchange Board of India (SEBI) definition, a multi asset fund must hold at least 10% in each asset class - debt, equity, and gold. Allocating the remaining 70% is at the fund manager’s discretion in a multi asset fund.
However, a dynamic asset allocation fund does not have any such mandate or regulatory requirements. A fund manager has greater flexibility to allocate their assets under management (AUM) across Equity & Debt in appropriate proportion they see fit to tackle or benefit from market conditions.
While the returns on investment from both of these mutual fund categories varies from fund to fund and period to period, they are both inherently hedged and moderate solutions to prevent serious drawdowns from market volatility.
How do dynamic asset allocation mutual funds invest?
Dynamic asset allocation mutual funds invest their assets under management across different asset categories. Such funds are free to allocate the money they manage as they please across equities, and debt. It is critical to invest your money in a dynamic asset allocation fund after you are aware of and comfortable with its risk profile, historic returns, and its fund manager’s investment strategy.
A dynamic asset allocation mutual fund is unbound by regulations or mandates that require it to allocate money to any particular asset class. Hence, over time, a fund may enjoy different taxation benefits over periods of holding different asset classes. These may also include equity-related instruments or real estate in addition to the conventional asset categories - gold, debt, and equities.
