Dynamic asset allocation products and their importance

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Different asset classes behave differently in different market scenarios, some asset classes are capable of generating good returns while others are stuck with negative or low returns at the same time.

Dynamic asset allocation plays an important role in investment management. Asset allocation simply means diversifying your investment between asset classes in order to help you mitigate risk in difficult market situations of a different market cycle, it also helps you get the optimal return from the asset. ‘investment. It is generally observed over a period of time in different market situations.

Thus, we can understand how important dynamic asset allocation is to capture market dynamics by limiting the volatility of your portfolio.

* To mitigate investment risk by allocating money, not to a particular investment segment.

* Through diversification, we can make all asset classes profitable, because all asset classes do not 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, FD banks, stocks and debt.

From data experience, liquidity criteria, and tax perspective, we have observed that debt and equity are the best investment opportunities for asset allocation that successfully covers all required aspects of investments. We consider these two asset classes for our investments, now the next question arises as to which allocation we should make when we should increase or decrease the allocation of debt and equities.

Can we manage our investments in debt and equities with our own strategy, but again the question is how do we know when to increase the allocation of debt or equities and how to effectively manage taxation so that our hard-earned money? is not taxed by taxpayers.

In the Balanced Advantage Fund category, fund managers carefully read market movements, using data points and present well research strategies and reports, they get a feel for market movement, which makes them helps increase or decrease equity using arbitrage opportunities. or debt allocation and effectively manage taxes.

There are many strategies followed by different fund managers to identify fund level debt and equity allocation levels. So here is the role of an asset allocation mutual fund product which is officially known as the Balanced Advantage Fund or BAF.

In summary, we can say that the BAF is nothing more than an asset allocation solution for the investor. This is an evergreen product on the mutual fund side as the asset allocation is done by the fund managers so the investor may not need to anticipate the market where he can put his money and it is simply a stress-free investment solution.

This product may be suitable for investors who are all looking for prudent and tax-efficient investment opportunities.

Opinions are personal: the author is Naveen Daga, a mutual fund distributor.


Warning: The opinions expressed are those of the author and are personal. TAML may or may not subscribe to it. The opinions expressed in this article / video are in no way intended to predict or time the markets. The opinions expressed are for informational purposes only and do not in any way constitute investment, legal or tax advice. Any action taken by you based on the information contained in this document is your sole responsibility and Tata Asset Management will not be responsible for the consequences of any such action taken by you.

Investments in mutual funds are subject to market risks, carefully read all documents relating to the plan.

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