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      Dynamic Asset Allocation

      • 5 min read
      • Last Modified Date: April 30, 2024
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      • What are dynamic asset allocation funds? Embarking on a journey through the realm of Dynamic Asset Allocation Funds opens the door to a resilient and responsive investment strategy.
      • In this introduction, we delve into the essence of these funds, which excel in their ability to seamlessly adapt to the ebb and flow of changing market conditions.
      • We will see dynamic asset allocation fund meaning and explore how Dynamic Asset Allocation Funds serve as a beacon of flexibility, optimizing portfolios to capture growth while effectively managing risks.
      • We will also see the Top 15 Dynamic Asset Allocation Funds in India in 2023 and the top dynamic asset allocation fund. 
      • Apart from dynamic  asset allocation funds, you can also invest in structured debt in commercial real estate, a field promising substantial returns and steady monthly income. With a modest investment of 10 lakhs, you can enter this domain via the esteemed alternative investment platform, Assetmonk. 

      But what is dynamic asset allocation fund?

      What are Dynamic Asset Allocation Funds 

      • Dynamic Asset Allocation Funds allocate funds to a combination of stocks and FD-like instruments, with the flexibility to adjust this allocation according to prevailing market conditions. This approach aims to offer investors the best possible returns while mitigating risks effectively.
      • Dynamic asset allocation funds fall within the realm of balanced or hybrid funds. 
      • This category predominantly involves distributing investments across various sectors, encompassing equity funds, real estate, stocks, and bonds.
      • During periods of economic slowdown or bear markets, dynamic asset allocation funds serve as a universal solution for consumers, irrespective of their risk tolerance. 
      • These funds are expertly managed by professionals who prioritize maintaining the quality of investments.
      • Dynamic asset allocation fund vs pure debt fund? What sets dynamic asset allocation funds apart from pure debt is their flexibility to adjust their portfolio allocation based on market conditions, instead of being bound to a specific asset class.
      • Dynamic asset allocation fund vs hybrid fund? Aggressive hybrid funds are required to uphold a consistent allocation of 65-80% to equities. Dynamic asset allocation funds have the flexibility to adjust their equity exposure within the range of 30-80%. This gets based on the strategies formulated by the fund managers.

      Dynamic Asset Allocation Funds Balanced Advantages

      Flexibility in Allocation

      Dynamic Asset Allocation Funds stand apart by offering the freedom to invest in both equity and debt without strict allocation percentages, setting them apart from other hybrid funds. This unique characteristic enables these funds to swiftly adjust their exposure to equity or debt as market conditions evolve.

      Enhanced Stability

      These funds excel in curbing downside risks during volatile periods, resulting in more consistent returns compared to traditional equity funds. Historical data indicates that even during years of minimal benchmark returns, the dynamic asset allocation strategy has consistently delivered notable outperformance.

      Less Market Volatility

      Dynamic Asset Allocation Funds capitalize on market volatility, optimizing returns during such periods and fostering long-term wealth creation. This approach involves purchasing undervalued stocks during market lows and selling them when valuations rise, effectively managing market fluctuations.

      Thoughtful Valuation Approach

      Fund managers typically employ a blend of valuation parameters, including price-to-earnings and price-to-book ratios, among others, to make informed investment decisions.

      Comprehensive Diversification

      The portfolio’s versatility allows investments across various market capitalizations—large, mid, and small. This strategy not only brings stability and liquidity through large-cap holdings but also harnesses growth potential via mid and small-cap selections.

      Taxation of Dynamic Asset Allocation Funds

      What is the tax treatment of dynamic asset allocation funds? Given their nature as primarily Fund of Funds, Dynamic Asset Allocation Funds carry notable taxation responsibilities. Dynamic asset allocation mutual funds are subject to Long-Term Capital Gains (LTCG) taxes.

      For indexed funds, a fixed tax rate of 20% applies, and the purchase price is adjusted for inflation rates. It’s important to note that capital gains calculations occur every three years, spanning from fund acquisition to the taxation period. In the scenario of non-indexed funds, the tax liability tends to be marginally lower.

      Top 15 Dynamic Asset Allocation Funds in India in 2023

      What are the best dynamic asset allocation funds in India? We shall see that below plus dynamic asset allocation fund returns.

      The best performing dynamic asset allocation funds or best dynamic asset allocation fund India is HDFC Dynamic Asset Allocation Fund with +20.09 percent returns.

      Name of the FundFund Size5- Year Return per annum
      HDFC Dynamic Asset Allocation Fund₹57,779 Crs+20.09 percent
      Edelweiss Dynamic Asset Allocation Fund₹9,247 Crs+14.58 percent
      ICICI Prudential Dynamic Asset Allocation Fund₹47,662 Crs+ 12.99 percent
      Sundaram Balanced Advantage Fund₹1,553 Crs+ 12.95 percent
      Aditya Birla Sun Life Dynamic Asset Allocation Fund₹6,641 Crs+ 12.93 percent
      Nippon India Balanced Advantage Fund₹7,031 Crs+ 12.52 percent
      Kotak Dynamic Asset Allocation Fund₹14,887 Crs+ 12.43 percent
      Motilal Oswal Dynamic Asset Allocation Fund₹685 Crs+ 11.71 percent
      Union Balanced Advantage Fund₹1,655 Crs+ 11.6 percent
      Invesco Dynamic Asset Allocation Fund₹631 Crs+ 11.1 percent
      Axis Dynamic Asset Allocation Fund₹2,011 Crs+ 10.68 percent
      Bank of India Balanced Advantage Fund₹100 Crs+ 10.66 percent
      Bandhan Balanced Advantage Fund₹2,470 Crs+ 10.56 percent
      HSBC Balanced Advantage Fund₹1,415 Crs+ 10.11 percent
      DSP Dynamic Asset Allocation Fund₹3,502 Crs+ 10.00 percent

      Source: ETMoney

      Bottom Line

      Dynamic Asset Allocation Funds presents an appealing option due to its potential to deliver superior returns over the long term, often rivaling those of equities or surpassing traditional debt funds. This characteristic makes Dynamic Asset Allocation Funds a reliable choice for fulfilling financial needs without disrupting the ongoing process of wealth creation through equity investments.

      In India, Assetmonk distinguishes itself as a unique alternative investment platform, presenting a diverse range of lucrative pathways for astute investors. Within these opportunities lies the domain of structured debt in commercial real estate and other thoughtfully curated alternative investment options. With a minimum investment commitment starting at 10 lakhs, Assetmonk extends exclusive and customized investment selections to its esteemed clientele.

      Related Articles

      1. Best Investment Options in India to get Higher Returns.
      2. How To Invest 10 Lakhs Rupees For Monthly Income in India.
      3. How To Invest 25 lakhs for Monthly Income.

      FAQs

      Q1. What are dynamic asset allocation funds?

      A. Dynamic Asset Allocation Funds allocate funds to a combination of stocks and FD-like instruments, with the flexibility to adjust this allocation according to prevailing market conditions. This approach aims to offer investors the best possible returns while mitigating risks effectively.

      Q2. Which is the best dynamic asset allocation fund?

      A. The best dynamic asset allocation fund is HDFC Dynamic Asset Allocation Fund with 5-year returns of +20.09 percent.

      Q3. Are dynamic asset allocation funds good?

      A.Yes. Dynamic asset allocation funds present a viable avenue for securing assured returns. They also are not concentrated in one investments only, but rather spread out.

      Q4. What is the taxation of dynamic asset allocation funds?

      A. Dynamic asset allocation funds are subjected to Long-Term Capital Gains (LTCG) taxes.

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