6 Best Dynamic Asset Allocation Mutual Funds to invest in 2019

Best Dynamic Asset Allocatoin Mutual Funds to invest in India - 2019Best Dynamic Asset Allocation Mutual Funds to invest in 2019


Mutual Fund investors keep thinking about the right time to invest. There is always a question in mind for investors that if the stock markets have reached a threshold level and expensive, should they shift their equity investments in debt instruments. Here come Dynamic Asset Allocation Mutual Funds. These mutual funds dynamically manage the portfolio between equity and debt instruments. These dynamic asset allocation funds are good for risk-averse investors. This article would provide some of the best Dynamic Asset Allocation Mutual Funds to invest in India in 2019.

What are Dynamic Asset Allocation Mutual Funds?


As the name indicates, Dynamic Asset Allocation Funds would manage the funds dynamically between equity and debt instruments. Fund manager of the dynamic asset allocation fund would invest in equity and debt segments based on pre-defined indicator called Price to Earnings Ratio (P/E Ratio). Generally P/E ratio is the key factor used to assess the valuation of the stock. If a P/E Ratio has reached a threshold level (e.g. The P/E ratio of benchmark), the fund manager would shift the funds from the equity (selling the stocks in this segment) to debt segments. If the P/E Ratio has come down due to stock market correction, the fund manager would sell debt instruments and increase equity. This is what is called as a dynamic asset allocation in funds.

Where do Dynamic Asset Allocation Mutual Funds invest?


It invests in following equity and debt instruments, however it can change depending on the investment strategy of the fund.

1) Equity / Stocks

2) Equity Mutual Funds (Fund of Fund invests in equity funds)

3) Bonds

4) Non Convertible Debentures

5) Fixed Income Options

6) Real Estate Investment Trust (REIts)

Advantages of Dynamic Asset Allocation Mutual Funds


1) Fund Manager is investing in equity when these are available cheap. This would provide a chance to get superior returns as the fund is investing in equity stocks that are available only at attractive valuations.

2) The fund would exit equity, which is expensive based on P/E Ratio. This always helps mutual fund investors who would ideally think not investing in expensive stocks.

3) These funds are considered as an excellent investment option during volatile times.

4) Due to the investment strategy these funds manage risk very well.

Limitations in Dynamic Asset Allocation Mutual Funds


We all know that investment in equity should be invested for the long term. However fund uses P/E Ratio as a basis and exit stocks. There could be opportunity that P/E Ratio could mislead and stock can still go up in future. Such opportunities are lost here.

Bull run would always show high P/E. Hence such fund may or may not always perform well in the bull run as fund manager is anyway exiting without taking opportunity from such bull run.

How Dynamic Asset Allocation Mutual Funds are taxed in 2019-2020?


Dynamic Asset Allocation Mutual Funds would fall under Hybrid Mutual Funds category. However, there are few such funds that are debt oriented, hence their tax treatment would be like debt funds. One should check the fund about categorization of hybrid fund or debt fund and compute the tax on the returns received from such funds.  

Taxation of Dynamic Asset Allocation Fund (Hybrid category)


1) The income tax rate of short-term capital gain (STCG) (<1 year) on such dynamic asset allocation mutual fund is 15%.

2) The long-term capital gain (LTCG) (>= 1 year) on such fund is 10% if it’s exceeding Rs 100,000. However, LTCG from equities are exempt up to Rs 100,000 in a financial year

Taxation of Dynamic Asset Allocation Fund, which is falling in Debt Category

1) The long-term capital gain tax rate (>=3 years) on debt funds is 20% with indexation benefit.

2) The short-term capital gain (< 3 years) on such funds is according to the investors Income Tax slab rate.

How Dynamic Asset Allocation Funds are different from Pure Hybrid Funds?


In simple terms Pure Hybrid Funds work based on investments in equity upto 65% and balance in equity. However, in Dynamic Asset Allocation Funds, even if the equity allocation is up to 65%, if such stocks are expensive, such funds would exit from such stocks. Below chart would help you to understand better for the difference between these 2 categories.

6 Best Dynamic Asset Allocation Mutual Funds to invest in 2019


#1 – HDFC Balanced Advatage Fund

This fund is categorized under Hybrid Mutual Fund. This fund is a consistent performing fund that gave 18% annualized returns in the last 10 years. Even in this volatile market, this fund gave 8% returns in the last 1 year. This is one of the Top and Best Dynamic Asset Allocation Mutual Funds to invest in 2019.

#2 – Reliance Balanced Advatage Fund

Even this fund is categorized under Hybrid Mutual Fund. This fund is a consistent performing fund that gave 16% annualized returns in the last 10 years. Even in this volatile market, this fund gave 6% returns in the last 1 year.

#3 – L&T Dynamic Equity Fund

This fund gave 12% annualized returns in the last 5 years and 8% annualized returns in the last 3 years and 4% in the last 1 year. Value Research Online Rated this fund as 2 Star (2 out of 5).

#4 – Invesco India Dynamic Eqyuity Fund

This fund gave 14% annualized returns in the last 10 years, 12% annualized returns in the last 5 years and 11% annualized returns in the last 3 years. Value Research Online Rated this fund as 3 Star (3 out of 5).

#5 – ICICI Prudential Balanced Advantage Fund

This fund gave 14% annualized returns in the last 10 years, 12% annualized returns in the last 5 years and 11% annualized returns in the last 3 years. Even in this volatile market, this fund gave 6% returns in the last 1 year, which proves that this is fund could be even for risk-averse investors.  Value Research Online Rated this fund as 4 Star (4 out of 5). This is one of the Best Dynamic Asset Allocation Mutual Funds to invest in 2019.

#6 – Aditya Birla Sun Life Balanced Advantage Fund

This fund gave 12% annualized returns in the last 10 years, 12% annualized returns in the last 5 years and 11% annualized returns in the last 3 years. Even this fund gave 5% returns in the last 1 year proving that it can manage well in volatile markets. Value Research Online Rated this fund as 5 Star (5 out of 5). This is one of the good Dynamic Asset Allocation Mutual Funds for 2019.

Here is the list of Best Dynamic Asset Allocation Mutual Funds to invest in 2019


List of Best Dynamic Asset Allocatoin Mutual Funds to invest in India in 2019

Who should invest in Dynamic Asset Allocation Mutual Funds?

These funds invest in equity and move to debt dynamically, hence investors would get doubt whether these are low risk or high risk investors.

1) These mutual funds are for risk-averse investors.

2) Investors who do not want to take a risk in volatile markets can invest in such funds.

3) Investors looking to invest in equity funds without taking too much risk can invest in these funds. Means these are for low to medium risk investors.

4) Investors who want to diversify between high risk funds and some low risk funds can invest in these dynamic asset allocation funds.

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Suresh KP

Best Dynamic Asset Allocation Mutual Funds to invest in 2019

One comment

  • debora

    I found your article very informative. Thanks for sharing this valuable information with us, it is really helpful article!

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