Dynamic Asset Allocation Mutual Funds

Security Board of Exchange (SEBI) has not set any limit for the allocation percentage of balanced advantage funds. These funds have the freedom to allocate any percentage of their assets, ranging from 0% to 100%, and can invest in both equity and debt.

In dynamic asset allocation, the fund manager changes the portfolio based on the market condition.

For Example-  During a bear market when equities are falling, the fund manager might increase the allocation in debt. Similarly, if the Equity is doing well, the fund manager might increase the allocation in equity.

There are multiple benefits balanced advantage Mutual Fund offers, here are some of them:

Freedom to Fund Manager

Dynamic asset allocation gives flexibility to fund manager that allows them to change their assets based on market volatility and opportunities. This allows them to make quick decisions that maximize returns.

It Adapts the Market Trends

This balanced advantage maintains the balance between their portfolio. In a bear market, a manager might put more money into debt and less into equity. However, when there is a bullish market a manager might choose to put less money into debt and more into equity.

Stable Returns

Dynamic asset allocation seeks to offer more stable returns over time by allowing investors to move their money between various asset classes. This helps investors achieve a balance between risk and reward, potentially enhancing long-term performance.

Good Risk Management

It reduces risk by shifting investments to safer assets during market downturns and improving allocation to growth assets during advantageous market conditions.

Fund for All Types of Investors

Dynamic asset allocation funds offer to a diverse group of investors with various risk tolerances and investment objectives. Whether conservative or aggressive, investors can discover a good alternative that matches their preferences and goals.

Opportunity Capture

It allows investors to capitalize on developing ideas and growth-oriented industries, thus enhancing overall portfolio performance.

Here are some simple steps to invest in dynamic asset allocation with mysiponline.com:

• Step 1: Register for free on MySIPonline.com and download the app.
• Step 2: After registration, click on the Explore Mutual Fund Section.
• Step 3: Select your preferred fund and add funds to your cart
• Step 4: Complete profile (PAN card, Aadhar number, bank details, nominee, signature)
• Step 5: Choose between Online SIP or lump sum investment options.
• Step 6: Make the Payment using UPI or net banking.
• Step 7: Track your investments daily and use our analysis tools.

It is always important to take the necessary precautions before investing in these kinds of Hybrid Mutual Funds. In order to save you from making certain mistakes here are simple points that should be kept in mind.

Timing the Market

Trying to predict when the market will go up or down and constantly changing how you invest your money can cause you to miss the chances to make money and end up spending more on buying and selling investments.

Fear and Greed

These two emotions are frequently present and might have an impact on investing decisions. During market downturns, fear may cause investors to sell their holdings quickly, while greed may drive them to pursue large gains without taking related risks into account.

Risk Management

Failing to adequately consider and manage risks associated with dynamic asset allocation can expose your portfolio to unnecessary volatility and potential losses.

Confirmation bias

Confirmation bias is when investors only look for information that agrees with what they already believe, while ignoring anything that disagrees. This can make them miss important facts and make bad investment decisions. It's crucial for investors to stay open-minded and consider all information before making decisions.

Neglecting Regular Rebalancing

Failing to periodically rebalance your portfolio to maintain the desired asset allocation can lead to deviations from your investment objectives over time.

Not Matching with Investment Goals

Using dynamic asset allocation techniques to invest might result in less than ideal-results if they are not in line with your time horizon, investment objectives, and risk tolerance.

Conclusion

Successful dynamic asset allocation requires managing emotions, mitigating risks, rebalancing regularly, avoiding confirmation bias, and aligning investments with goals.

The capital gains from dynamic asset allocation funds are taxed differently depending on their equity holdings. If the equity investment is over 65%. On the other, the debt fund tax rules are implemented if the equity investment is less than 65%. Let’s understand how the tax implications are calculated with the table given below -

For Equity-oriented funds

Short-term (Less than 12 months): Profits are taxed at a flat rate of 15%, regardless of the investor's income tax slab.

Long-term (12 months and more): Profits up to Rs.1 lakh are tax-exempt. Any gains above Rs.1 lakh are taxed at a rate of 10%.

For Debt-oriented funds

Short-term (Less than 36 months): Profits are added to the investor's overall income and taxed at the applicable income tax slab rate.

Long-term (36 months and more): Profits are taxed at a rate of 20% after indexation, which adjusts the purchase price for inflation.