New investors and conservative investors can opt for Dynamic Asset Allocation Schemes and Balanced Advantage Schemes in times of market uncertainty. Such funds adjust the equity-to-investment ratio based on market value. At present such funds invest 40 per cent to 60 per cent in equities and the rest in arbitrage-bond products.
Investing ‘dynamically’ is one of the basic principles of investing. Dynamically investing means adjusting the investment ratio according to the market climate. The percentage of assets to be invested in equities and whether to invest in bonds or fixed income sources depends on the market.
Fund managers’ views on investment dynamics vary from fund to fund and from fund house to house. Dynamic funds operate on the basis of certain criteria for assessing the market when it is not easy for an investor to decide what percentage of the stock should be invested and what percentage of the fixed income should be invested in a market climate.
The uniqueness of Balanced Advantage Funds is that fund managers are actively reducing and increasing the investment ratio of equities and bonds according to the market climate. These funds increase their investment in bonds when the stock market is volatile.
Similarly, when the stock market costs are low, the investment ratio in equities rises. The investment ratio will be between 30% and 80%.
Balanced Advantage Funds also seek to take advantage of the volatile situation by taking a position that benefits from the difference between the price of the stock futures and the spot price.
Such funds, which adjust the investment ratio based on the principle of high level risk avoidance, are more dynamically adjusted to investment than normal balanced funds.
Equity Oriented Balanced Funds are invested in at least 65-70% of the market at any level. At the same time, dynamic funds achieve flexibility in the investment ratio in line with the market climate.
Such funds are ideal for low risk investors. It should also be noted that such funds may not be suitable for investors with average or high risk aversion.
