The Mutual Fund Show: Should You Invest In Dynamic Asset Allocation Schemes?
This type of fund provides a well-rounded mix of stocks, bonds, certain commodities, assets, and an element of arbitrage.
This is a great time to invest in dynamic asset allocation funds, according to Mohit Gang, co-founder and chief executive officer at Moneyfront. It provides a well-rounded mix of various elements, including a combination of stocks, bonds, certain commodities, assets, and an element of arbitrage that influences and impacts stock taxation, he said.
It is never a bad time to invest in a dynamic asset allocation fund, according to Rushabh Desai, founder of Ruppee With Rushabh. "Balanced advantage funds are dynamically managed between equity and debt," he said.
Desai lists factors favouring dynamic asset allocation funds in the current market scenario:
Mid and small-cap valuations are expensive.
Large-cap valuations are comparatively reasonable.
Volatile equity markets are positive for arbitrage spreads.
Debt yields are in their peak range.
"This is a brilliant category to have, as it autotunes your portfolio under all market cycles," said Gang. "The fund manager is actively adjusting between stocks and bonds, increasing stock holdings when the market is favourable and decreasing them when the market becomes risky," he added.
According to Gang, the key highlights of investing in dynamic asset allocation funds are as follows:
Combination of growth through equity investments.
Safety of debt investments.
Planned with a medium-term perspective.
Capital protection, along with stable growth.
Desai said that balanced advantage funds should have a minimum time horizon of 4-5 years. The best approach is to have a combination of pro-cyclical and counter-cyclical products. This type of product is suitable for those willing to take moderate risks, he said.
Desai's top picks: Edelweiss Balanced Advantage Fund and ICICI Prudential Fund.
Gang's top picks: HDFC Balanced Advantage and ICICI Pru Balanced Advantage Fund.
Watch the full discussion below
Query 1: I have SIPs in seven funds and can additionally divide and invest Rs 12,000 in them. Can I achieve my target (retirement corpus) through these funds, or do I need to make changes?
Name: Amit Sharma | Age: 41 years
Mohit Gang: Consider raising your target for retirement savings. By increasing your SIPs, you can achieve even better results. You may also want to raise the risk level in your investment portfolio and consider adding another mid-cap and small-cap fund.
You can choose from Edelweiss Midcap Fund, ICICI Pru Small Cap Fund for new SIPs. You can also go for a passive allocation with Momentum 30 Index Fund and ICICI Nifty 50 Index fund.
Rushabh Desai: Avoid multiple funds of the same AMC and diversify across different AMCs and styles.
I would suggest you stop the SIPs in Axis Bluechip, HDFC Retirement, HDFC Top 100, ICICI Pru Bluechip and ICICI Pru ELSS Funds.
Query 2: I want to invest Rs 2,000 per month in mutual funds for the next 1.5 years. Can you suggest a few funds?
Name: Shyam | Age: 20 years
Rushabh Desai: 1.5 years is a very short time horizon for SIPs in equity. (You) can go for an SIP in debt mutual funds. Look at equity if you have a six or seven–year time horizon.
Recommendation: Motilal Oswal Nifty 500 Index Fund.
Mohit Gang: Not an ideal time for equity. You need to have at least a five-year time horizon. It is difficult to make Rs 1.5 lakh corpus in this short time. You need to increase the time frame.
