If you are a serious investor, you should know about asset allocation fund in India. You may be flabbergasted by the presence of so many different types of investments options like stocks, bonds, mutual funds, etc. under asset allocation fund; you will be able to build a mix of stocks, mutual funds and bonds that you wish to hold. There is a technique to do it and to know the best Asset Allocation Funds. With the help of an asset allocation facility, you can get the right mix of investments with minimum risk of losses.
Before you proceed to know in-depth about asset allocation fund in India or dynamic asset allocation facility, you must know what asset allocation is. Asset allocation is a technique of investment portfolio. The objective is to spread the assets into various categories like cash, stocks, real estate, etc. Each category has a unique level of return and they have different types of risk. Their natures are different and it’s good for you to know more than the best asset allocation funds available. It may so happen that an asset category may increase in its value while another one may go downhill. Overall, it’s less risky because all your investments won’t go bad. You gain some or you may lose some. It’s never a total loss since gains average out on the loss. If you ask any professional, he will tell you that you must be aware of the best asset allocation funds because this way you gain. This way you can have a combination of investments that will be beneficial to you in the long run. You should keep the following in clear sight while thinking about the allocation of assets: Risk vs return It’s a combination you have to know and learn. There is always a trade-off between risk and return. You cannot rest and relax by simply investing in the stocks of the highest return. Being a smart investor, you should be able to understand the interplay between risk and return. The crashes in the financial market from the 1930s till recent years stand testimony to the fact that there is no one high-return investment you can bank on. Don’t trust software or planner sheets There is some financial planning software that has been designed by the financial advisors to benefit the investors. They cannot be trusted blindly. The formula innate in these plans is not entirely trustworthy. You should know your goals You know your financial goals. You may wish to develop a retirement corpus, fund for education or marriage, building a house, and so on. You should infuse it into your asset allocation plan. You can make use of a dynamic asset allocation facility. The time available is also very important in planning your asset allocation. You may need a particular amount after six years or ten years for the higher education of your child. There are three questions you need to ask yourself to know asset allocation: What level of tolerance of risk you have? What rate of return you are looking at? How much time you have for keeping the investment? It is true that one size is not for all. You should have a broad horizon and then ask questions about investing in asset allocation funds. One should know what liquidity is. Liquidity means how easy it is to acquire an asset and to sell it. The securities that can be liquidated and sold easily at high value are known as high liquidity assets. In a way, cash is supposed to be the most liquid of all assets. Other liquid assets could be government funds aside from other instruments. The real estate is less liquid. The volume of their trade is lower compared to other more liquid assets. Advantages of liquidity The pricing is honest and that enables it to be easily sold. These are the most suitable investment options. These investments can be opted for by anybody. There are no restrictions on net worth or level of minimum investment. If you are not accredited, you too can invest easily. It is easy to invest for accredited investors too. Does the liquidity of funds have any disadvantage? There are some drawbacks also to the liquidity of funds. Asset allocation funds are subject to market fluctuations. A global financial crisis can send this investment option to a tizzy. Your investment and investment plans can go out of sync with the present crisis. These are the risk factors you have to take into account before deciding on investing in the asset allocation funds. Despite the risks involved, it is advisable that you go in for this kind of investment option. With professional guidance and with some experience, you can get over the demerits.
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Investing in a good equity mutual fund scheme in India is a great way to build up your savings throughout the year. Equity mutual funds deploy investments in shares of several companies. Fund managers attempt to provide superior returns through spreading investments throughout companies in varied business sectors or with varying levels of market capitalizations too. In most scenarios, equity mutual funds usually offer superior returns in comparison to regular term-based deposits or even debt fund schemes. There is always a risk component linked to such funds although you must remember that their overall performance is dependent upon market circumstances.
When it comes to the best equity funds¸ there are several types that you can choose from in this regard. Remember that all equity mutual funds returns will not be equal; it depends largely on the kind of fund and its latent characteristics above all else. There are theme and sectoral funds where the equity mutual fund may adhere to any particular theme for investment, i.e. a global stock theme or any emerging market theme among others. Some plans may invest in any specific business sector in the market including pharmaceuticals, banking and financial services and so on. You should remember that theme or sectoral funds have higher risk levels since they usually emphasize upon any specific business theme or sector. There are focused equity mutual funds which invest in a maximum number of 30 stocks of entities with market capitalization being specified at the time of the scheme’s launch. Contra equity funds have a contrarian investment strategy or style. They analyze markets for working out stocks which are not doing well and buy them at comparatively lower prices with the assumption that they will recover ultimately in the long haul. There are large cap funds which usually invest at least 80% of overall assets into buying equity shares of large cap entities. These plans are usually more stable than small cap or mid cap focused mutual funds. Mid cap funds usually deploy close to 65% of overall assets in purchasing equity shares of mid cap entities. They mostly offer comparatively stellar returns as compared to large cap funds although with higher volatility levels in the bargain. Small cap funds usually invest approximately 65% of overall assets into equity share purchases of small cap entities. The schemes usually provide good returns as compared to mid and large cap plans but they have higher volatility levels alongside. Multi cap funds usually deploy 65% of assets into equity shares of large, mid and small cap entities in diverse proportions. The fund managers rebalance portfolios for staying in sync with markets and economic circumstances along with investment goals of schemes. ELSS is the sole plan which offers tax deductions up to Rs. 1.5 lakh under Section 80C. They invest 80% of overall assets into equity and equity linked instruments. They also have three year lock-in periods likewise. Other equity funds are non-tax saving plans. Returns will incur capital gains taxes. The benefits include lower expense ratios, diversification of the portfolio, expert management of investments, SIP or systematic investment plan options and higher liquidity, flexibility and cost-effectiveness in turn. |
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April 2022
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