
What are dynamic asset allocation funds? Are they different from balanced advantage funds? I plan to start a monthly SIP of Rs 10,000 in a good Dynamic Asset Allocation Fund. Please advise.
Reshma
By Rajiv Bajaj, Chairman & MD, BajajCapital Ltd
Dynamic asset allocation funds, or balanced advantage funds or hybrid funds offer investors a diversified portfolio of equity and debt securities. These funds aim to strike a balance between growth-oriented high-potential companies’ equity shares and highly-rated bonds of public sector undertakings, banks, and top-notch corporates. By investing in these funds, individuals can benefit from the potential upside of equity investments while enjoying debt instruments' stability and income generation.
When considering investing in dynamic asset allocation funds, it is important to have a long-term perspective. These funds are well-suited for investors with a time horizon of at least five years or longer. Investors can benefit from the market cycles and achieve better returns by staying invested for a longer duration.
If you are interested in starting a Systematic Investment Plan (SIP) in Dynamic Asset Allocation Funds, several options are available. Notable schemes in this category include:
HDFC Balanced Advantage Fund
ICICI Pru Balanced Advantage Fund
Kotak Balanced Advantage Fund
Tata Balanced Advantage Fund
Instead of selecting just one fund from the above options, it is advisable to diversify your investments by choosing any two funds and splitting your monthly investment amount equally between them. For example, you can invest Rs 5,000 in each of the two chosen funds through SIPs. This approach can help you spread your risk and benefit from the different investment strategies employed by each fund.
Before making any investment decisions, it is crucial to carefully read the offer documents and understand the investment objectives, risks, and expenses associated with these funds. Additionally, considering your financial goals, risk tolerance, and investment horizon, consulting with a financial advisor can provide valuable guidance to make informed investment choices.
(Views expressed by the investment expert are his/her own)