What is Best Dynamic Asset Allocation Funds India: Meaning

What is Best Dynamic Asset Allocation Funds India: Meaning

The financial market often faces crisis due to a recession or a bearish economy that affects your investment returns adversely. A dynamic asset allocation fund can help you in such a period without lowering your investment returns. Consider reading this article to know more about this fund!

Definition of Dynamic Asset Allocation Funds

Dynamic asset allocation funds are also known as balanced advantage funds considering their balanced and hybrid nature. These funds invest in both debt and equity investment instruments and continually change their allocation as per the market conditions. Consequently, these funds come with the potential of providing you with maximum returns at low risks.

Fund managers choose stocks, bonds, real estate, and equity funds to invest in the best dynamic asset allocation fund. Dynamic asset allocation funds are designed to lower the impact of market volatility and associated risks and maximize your returns.

Purpose of Dynamic Asset Allocation Mutual Fund

Static allocation funds cannot cope with market uncertainty and fail to provide an assured return to investors. Dynamic funds, as the name suggests, shift to a better-performing investment vessel when the previous one is facing a downfall.

This dynamic nature helps reduce the impact of market slumps and provides steady returns to investors. So, if you have limited funds to invest and want an assured return on maturity, a dynamic asset allocation fund is the best thing you can opt for. They offer recurring returns and can brace any kind of market volatility. With these funds, you can invest in multiple investment instruments and diversify your investments easily.

Benefits of Dynamic Asset Allocation Mutual Fund

You can invest in dynamic asset allocation funds as it has the following notable benefits:

  •         As already mentioned, investing in dynamic asset allocation funds let you diversify your portfolio. These funds come with the advantages of investing in bonds and real estate (comparatively low-risk profile) as well as equity markets (high-risk).
  •         Being diverse in nature, these funds allow you to invest in multiple investment instruments, thereby cushioning the risks of concentration.
  •         Considering their diverse nature, taxation on dynamic asset allocation funds is quite relaxed. You can avail tax exemptions in various sectors as the investment opportunity is spread across multiple vessels.
  •         Fund managers conduct constant research and analysis to allocate assets in multiple schemes assessing the market condition. As a result, they can resist the bearish pulls and provide you with a stable return over time.
  •         You receive an optimised risk-reward ratio by investing in these funds and earn higher returns compared to other debt or equity funds.

Steps to Invest in Dynamic Asset Allocation Mutual Fund

Investing in Dynamic Asset Allocation mutual funds is quite easy. You can follow these easy steps to complete your investment:

  •         Register online on a reliable trading platform
  •         Browse to the MF section and select a preferable Dynamic Asset Allocation fund
  •         Click on invest option
  •         Select the amount and mode of investment, i.e., SIP or Lumpsum
  •         Enter your KYC details, e.g., PAN, bank details, etc., to complete your investment

Factors to Consider While Investing in Dynamic Asset Allocation Mutual Fund

Here are some of the factors you should consider before investing in dynamic asset allocation funds:


Dynamic asset allocation funds invest in both equity fund as well as debt funds. They keep on changing the investment vessel considering the market scenario. Thus, these funds come with the potential to offer you decent returns at the end of the tenure.

Risk Level

Mutual fund investments are never absolutely risk-free. These funds also come with some associated risks as they invest in equity instruments besides debt. However, considering their diversity, these funds are less risky than equity funds. So, if you are prepared to bear low or medium risk and earn higher returns in the long run, a dynamic asset allocation mutual fund is a viable option.

Investment Horizon

These funds are not short-term investment instruments like debt funds. You have to keep your funds invested in dynamic asset allocation funds for at least three years. Consequently, your investment will go through multiple market conditions and come up with an assured return at the end of its tenure.

So, you can invest in these funds to diversify your investment profile and earn higher returns in the long run.

Taxability of Dynamic Asset Allocation Fund

The overall return you earn from mutual fund is taxable. Mutual funds offer you dividends according to your investment and returns. These dividends add up to your overall income and are taxed as per your IT slab rate. Dynamic asset allocation fund taxation depends on the equity exposure of your investment portfolio. If the equity exposure is more than 65%, the taxation process will be similar to any other equity funds. However, in case of less than 65% equity exposure, taxation will be charged as per the rules of debt funds.

Here is a detailed interpretation for your understanding:

Equity-oriented Funds

If the holding period is less than 12 months, a 15% tax is charged irrespective of the income tax slab. However, for long-term funds with a holding period of 12 months or more, the tax charged will be 10% along with a cess for any amount above ₹1,00,000.

Debt-oriented Funds

For short-term funds with less than 36 months holding period, dividends will be taxed as per the IT slab rate. However, for a holding period of 36 months or more, 20% tax will be deducted after indexation.


A dynamic asset allocation fund is a convenient option when you want to get higher returns and portfolio diversity at minimal risk. Experienced fund managers are always there to allocate your asset in suitable avenues as per the market scenario.