The Mutual Fund Show | Static vs. dynamic asset allocation: what works best?


Asset allocation is a key part of investing. But what could be better: static allocation funds that retain the composition of the portfolio or those that actively change the allocation based on relevant trends?

According to Swarup Mohanty, Managing Director of Mirae Asset, an investor is spending too much time or focusing on trying to ‘synchronize the market’, which returns less than 2%, while ignoring the asset allocation which constitutes more than 90% investor returns. Investment managers. It is impossible to predict which asset class will outperform as the winners keep spinning; so asset allocation remains the middle way to deliver equity-linked returns with much lower volatility, he said in Bloomberg’s weekly special Quint. The Mutual Fund Show.

And since volatility is the only trend in the equity market, static allocation funds, which allocate a predetermined percentage to different asset classes, will perform better over time and are the best way to invest, said. Mohanty. Aggressive hybrid funds, which are balanced funds that invest primarily in stocks with some allocation to fixed deposit-type instruments, outperformed aggressive asset allocation funds.

Salonee Sanghvi, founder of My Wealth Guide, a financial planning consultancy, differs, however. Although she recognizes the importance of asset allocation, Sanghvi prefers dynamic asset allocation funds, which change the proportion of assets according to market fluctuations.

For a new investor, stability of performance would be more important than return, she said on the same show. Instead of an investor taking the risk of an aggressive hybrid fund, it is better to separate the equity and debt portfolios themselves and invest in pure equity funds and pure debt funds separately, said Sanghvi.

Regarding BFSI funds, Sanghvi said that since most large caps and flexi caps already have 30-40% exposure to financials, in line with the larger index, a separate BFSI fund is not required. But for aggressive investors, a BFSI fund could be part of their satellite portfolio, she said.

On debt funds less than six months old, Sanghvi said safety of capital and liquidity is of paramount importance, advising investors to look to money market funds which are expected to return 4 to 4.5%. with a portfolio made up largely of Treasury bills and rated A1 +.


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