SBI Dynamic Asset Allocation Fund - Regular Plan - Growth: A Well Diversified and Disciplined Scheme!

SBI Dynamic Asset Allocation Fund - Regular Plan - Growth: A Well Diversified and Disciplined Scheme!

Feb 17, 2018

Volatility is a common characteristic of financial markets. To steer clear from it, investors look for funds that don’t require them to put all their eggs in one basket. This investment diversity can be achieved by making investments in asset allocation funds.

Because achieving diversity is difficult and risk management is not every investor’s cup of tea, these funds come extremely handy for any regular investor.

One of the most common asset allocation funds is a balanced fund. These funds that aim at striking a balance between bonds and stocks have been in existence for more than seventy years.

Initially, when balanced funds came into existence, their allocation used to be in a 60-40 proportion. 60% of the investment used to be in stocks, while 40% remained stashed in bonds and other fixed income instruments. But today, a multitude of mutual fund schemes are available in the market featuring many different fund allocation percentages suited to the market conditions.

Now, an important question that arises here is- what are the benefits of opting for an asset allocation fund, the first place? The answer to which is that although there are numerous benefits of investing in an asset allocation fund, there are four most important ones that deserve a mention. Here we tell you what these four important benefits are -

Investment risks are low -

The performance of an asset allocation fund depends to a large extent on the balance between two extremely important aspects of the fund- risk and return. And one of the most important reasons why people invest in such funds is that they are less risky. One thing you should keep in mind is that a portfolio that is diversified is less prone to getting affected by market volatility. The reason? Well, the reason is that the portfolio of such a fund doesn’t remain inclined to one risky security; it is always a mixture of both risky and non-risky investments across gold, real estate, debt and equity.

No single asset exercises dominance

Asset allocation funds don’t remain dependent on any single asset class. And this is important for a fund’s performance. After all, not every asset under a particular asset class such as equity performs equally well at the same time. Hence, it’s advisable that you pick different stocks and different mutual fund categories like large cap or value style, and make efficient allocation of funds even if you have to do it within the same category.

Market turbulence fails to affect you

Anyone who is familiar with the game of mutual fund investment knows that when equity puts you in loss, debt and gold come for your rescue. And that is why it’s never a wise idea to have all of your investment in equity funds. After all, the market is unpredictable and having all of your funds in the form of equity will only make things extremely risky for you. A well allocated or diversified portfolio saves you from market turbulence. Not just that, it will also offer you growth even during market lows.

You won’t have to time the market

If you wish to time a market linked a single asset, then you might very well go for it- if you have got experience you will do it well. But if you had to time the market movement and performance across asset classes, it would be a burden on you or you would simply give up. In fact, even the most experienced of players find this job daunting. So, what is it that you need to do? You need to invest in an asset allocation fund and forget about timing the market.

So, it may be inferred here that the benefits of investing in an asset allocation fund are numerous, but which fund to choose is a question that follows on the heels of your decision to invest in such a fund. Now, your decision to invest in a particular scheme might depend on the kind of financial goals you might have. But if you are looking for a sure-shot solution, then opting for SBI Dynamic Asset Allocation Fund – Regular Plan – Growth would be the best bet.

Let’s take a deeper look into the various aspects of this fund, here-

SBI Dynamic Asset Allocation Fund – Regular Plan – Growth

It’s a closed-ended growth fund launched on the 24th of March, 2015. The primary goal of the fund is to offer investors the chance to make profits by investing in a diversified portfolio containing a mix of instruments that offer fixed income and equity/equity related securities. The allocation of funds under this scheme in equity and debt funds happens in a dynamic manner so as to provide investors long term capital appreciation.

If you wish to invest in this fund scheme, you will have to begin with a minimum investment amount of INR 5000.

Now, let’s have a look at the scheme performance table of the fund. The plan offered a return of 8.67% in the first year of its inception against the 6.26% return that other comparable funds offered in that year. Since the fund hasn’t aged much, we don’t have return values for its third, fifth, and tenth years of inception. What we have is its since-launch return percentage which is 6.73% as opposed to the 8.18% market average return. Considering what the scheme has delivered ever since its launch, it may be asserted that it’s a great scheme to make investment in.

Source: Swaraj Wealth Research

Growth of 10000 in SIP

If you are someone who is looking to make an SIP investment, then taking a look at the example below will be of immense help. According to the results shown below, if you started investing an amount of INR 10000 from 03-11-2016 on a monthly basis, then by 03-10-2017, you would have earned a profit INR 5729. That means, the fund value would be INR 125729, and the return percentage over that year would be 10.63, which is quite impressive.

Source: Swaraj Wealth Research

Growth of 100000 in Lumpsum

If, however, you believe in making a lumpsum investment, then you can very well do so if you have some extra cash at hand. If you had invested a sum of INR 100000 on 03-11-2016, then you would have received a return percentage of 12.59 by now. The total fund value would be 111465 and the amount of profit you would have earned is 11465.

Source: Swaraj Wealth Research

So, irrespective of whether you choose the SIP or the Lumpsum approach to invest in SBI Dynamic Asset Allocation Fund – Regular Plan – Growth, you are sure to get good returns, considering the kind of performance it has shown ever since its inception. But one thing that you need to keep in mind irrespective of whether you invest in this scheme or any other asset allocation plan is that you must keep rebalancing your portfolio from time to time or as per your requirement or according to the demands of the market. This is to make sure that your portfolio always works in your favour.

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