Thursday, 3 November 2016

How Dynamic Asset Allocation can achieve Growth Backed with Safety?

While experienced investors might be well aware of the Dynamic Asset Allocation benefits, for the new investors who want to try their hands on Mutual Funds, ICICI Prudential Balanced Advantage Fund which uses its in-house asset allocation model is a good option. Basically, it is an investment strategy that attempts to balance risk versus reward by diversifying the investment portfolio across various investment instruments like debt, equity etc. Following this hybrid distribution of investment, the overall risk factor is reduced along with the possibilities of growth.

On the same lines, ICICI Prudential Balanced Advantage Fund - An Open-Ended Equity Fund, strives to achieve growth balanced with safety. The basic Dynamic Asset Allocation strategy of this Balanced Advantage Fund is to buy low and sell high, and generate alpha while limiting the losses. It may sound too simple but it is not, as it requires immense fund management expertise and not getting swayed by market sentiments.

It is very important to limit the losses and contain the downside to your portfolio as containing even a certain percentage of the loss can keep your portfolio at a higher value after the loss and also reduces the gain needed to break even. Wondering how this can be done? ICICI Prudential Balanced Advantage Fund uses it's in-house asset allocation model to buy when the valuations are low and sell when the valuations are high. This fund invests in both Equity and Debt instruments, allocates higher in equity when the Equity Market Valuation is low and lower when the Equity Market Valuation is High. This ensures that you get your gains from the market volatility over the long term.

The minimum application amount for this fund is Rs.5000, the minimum additional application amount is Rs.1000 while the minimum redemption amount being Rs.500.

Some other benefits of this fund are potential tax-free returns with an aim to provide month-on-month tax-free dividends. You can also manage your monthly cash flow with the Automatic Withdrawal Plan and Monthly Dividend Feature. The details and terms/conditions can be checked from their official website by clicking here.

The performance of ICICI Prudential Balanced Advantage Fund has been good since its inception in 2006. The comparative view with respect to the standard benchmarks (Nifty or Sensex) and point-to-point CAGR on a standard investment of Rs.10,000 from their factsheet instills confidence over this product.

Currently, the equity market valuations are not very attractive and hence, it is a perfect time to invest systematically in equities. This fund can be appropriate for the new as well as seasoned investors who want to achieve good returns on their investments but at the same time ensuring that they minimize the chances of losing out their capital. The dynamic asset allocation in different investment instruments according to the changing market conditions creates a robust investment model. It should be seen as a long term wealth creation solution, and a perfect balance of reward and risk.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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