The first thing investors should
focus on while investing in mutual funds is that their investment should be
based on asset allocation formula. That is, the investment he is making should
be divided into both debt and equity, as he reduces risk and gives good
returns. By adopting the same method, many more mutual funds have outperformed
the Nifty in terms of returns. Dynamic asset allocation fund invests in a mix of
instrument tools such as stocks and FDs. However, they vary this fund allocation
periodically depending on market conditions to provide you with optimal returns
while maintaining minimal risk. That type of fund allocation called dynamic
asset allocation.
An ideal mutual fund portfolio
allocation requires both debt and equity exposure. In a bull market, equity
exposure should be higher and debt should be lower, and recession debt exposure
should be increased and equity should be reduced. Funds should always be
carried by balanced asset allocation according to the market. Exposure to all
large cap mid cap small cap asset allocation varies. The fund manager
determines when, in which, how much, fund allocation is to be done according to
the market.
Looking at the data, it is clear that
when investing between different asset classes, it results in a positive long
term. The Nifty 50 TRI has given a return of 10.2 per cent whenever the market
has been in a boom or downturn in the past decade, while the Asset Allocator
Fund of ICICI Prudential Mutual Fund has given a return of 11.21 per cent in
the same period. One of the best allocation funds is ICICI Prudential Asset
Allocator Fund (FOF). Exposure has been
only 41 per cent in equity.
This means that if you had invested
Rs 10 lakh in Nifty in 2010, this amount would have increased to Rs 25,93,732,
while in ICICI Allocator Fund it would have increased to Rs 28,39,409. That is,
investors have gained about Rs 4.50 lakh more than the benchmark.
Not only this, even when the returns
of the benchmark indices have been flat, the above fund has been able to give
double-digit returns, which shows how profitable the asset allocation strategy
is. It is seen that whenever the market falls, investors immediately start
selling equity in fear. Historically, outside India, it has been seen many
times. Whenever it comes to equity investment and strategy, investors should
follow the strategy of buying at a lower price and selling at a higher price.
By adopting a similar strategy, the ICICI Prudential Asset Allocator Fund
offers good returns to investors.
According to the data, August and
September in 2017 and February and September in 2018 have been the months when
market valuations have been at their peak. Retail investors invested Rs
16,000–21,000 crore in the market at that time. On the other hand, when the
market valuation was at a low in January and September 2013, investors pulled
out Rs 17,000 crore from the market. A similar trend was seen in March 2014, when
investors withdrew Rs 13,000 crore.
This type of habit affects the
financial condition of the investors. ICICI Prudential, in contrast, follows
asset allocation and follows an inhouse valuation model based on all macro and
micro factors. Investors can also invest in such funds through SIP in such a
case. But it also needs to be seen that this investment is for the long term.
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