Dynamic asset allocation plays an important role in investment management. Asset Allocation means diversifying your investments across asset classes so that it helps you reduce the risk in difficult market conditions of a different market cycle, it also helps you get optimum returns from the investment. It is generally observed over a period of time in different market conditions.
Therefore, we can understand how important dynamic asset allocation is to capture market movements by reducing volatility in your portfolio.
* To mitigate investment risk by allocating funds, not to a particular investment segment.
* By diversification, we will be able to get returns from all asset classes, as not all asset classes move in the same direction simultaneously.
There are many asset classes in the market from which we can get this diversification, for example, real estate, gold, commodities, bank FDs, equities and debt.
From data experience, liquidity norms and tax point of view we have seen that debt and equity are the best investment opportunities for asset allocation that successfully covers all the essential aspects of investment. We consider these two asset classes for our investments, now the next question arises that how much allocation should we make when we should increase or decrease the debt and equity allocation.
Can we manage our debt and equity investments with our own strategy but then the question is how do we know when to increase debt or equity allocation and how to manage taxation efficiently so that our hard earned money But don’t get taxed.
In the Balanced Advantage Fund category, fund managers carefully read the market movements with the help of data points and current strategies and well-researched reports, they get an understanding about the market momentum which in turn allows them to utilize arbitrage opportunities. It helps to increase or decrease equity. Or debt allocation and managing tax efficiently.
There are several strategies followed by different fund managers to identify debt and equity allocation levels at the fund level. So, here is the role of an asset allocation mutual fund product which is officially known as Balanced Advantage Fund or BAF
In short, we can say that BAF is nothing but an asset allocation solution for the investor. This is an evergreen product from the mutual fund side as the asset allocation is being done by the fund managers so the investor may not need time to market to invest their money and simply it is a stress free investment solution.
This product may be suitable for investors looking for all-around conservative tax-efficient investment opportunities.
Views are personal: The author is Naveen Daga, a mutual fund distributor.
Disclaimer: The views expressed are those of the author and are personal. TAML may or may not subscribe to it. The views expressed in this article/video are in no way trying to predict the markets or time them. The views expressed are for informational purposes only and do not imply any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management shall not be liable in any way for the consequences of such action taken by you.
Mutual fund investments are subject to market risks, read all the scheme related documents carefully.