Moving Debt Assets vs Static Debt Assets
A Market Fall is a Superb Investment Opportunity provided you are sitting on Cash – Dynamic Asset Allocation Funds sit on invaluable cash that creates the Asset Allocation Alfa
1) Debt Yields have been low for a while
2) But does that mean, Debt Funds are not relevant?
3) Not at all
4) Debt Assets when mixed with Equity Assets is a different Asset Class Experience altogether ; The Asset Allocation and Rebalancing Experience
5) As can be seen from the image 91% of Returns is contributed on account of Asset Allocation and Rebalancing
6) So even though Debt Funds now have reduced yield capabilities on their own, they still work like magic in conjunction with Equity Assets
7) Therefore Hybrid Funds have become popular and every fund house is adding this to its Product Stable
8) The presence of Debt Assets in the Portfolio ensures that the Fund can book Profits in Equity and park the money by buying Debt Assets
9) And as equity valuations improve the Debt Assets provide the much needed Cash Power to buy Equity assets at attractive valuation by selling the Debt Assets
10) This Opportunity of Dynamic movement within the funds is the Process that plays a massive role in creating Returns and a Great Investing Experience
11) The fall in Debt Yields certainly has impacted Debt Funds that remain static
12) But when it is in association with Equity Assets and having the license to rebalance from time to time (without any tax implications), the Process Alfa (Returns induced by the Process) outweighs the Lower Yield of Debt Assets in the concoction (fund mix)
13) Moreover, there are no Tax implications when Rebalancing is taking place within the Fund (this is not the case when you do Rebalancing of assets externally at an overall Portfolio level)
14) Therefore Rebalancing can happen as many times and this turnover and movement massively contributes to the Investment Experience
15) A Volatile Market is seen as problem for most but for a Dynamic Asset Allocation Category, Market Volatility is the perfect environment to generate returns
16) Clearly an example of transforming a Problem into an opportunity
17) One needs to clearly distinguish between Dynamic and Static Debt Funds
18) Because the outcomes are very different
19) In every instance, the BAF category provides a much better investment experience with good returns (nearly equity returns) but with much lower Volatility
20) This better experience is even more pronounced during the first 4 to 5 years across any investment period
21) The Early years of Investing is a very delicate period for investors who are new into Investing and Great Investment Experience will help them become long term investors in order to experience serious Wealth Creation
22) Thus the Dynamic Asset Allocation Category (BAF Category) provide a great investing foundation for Investors during their early investing years
23) They create the perfect ground upon which Power of Compounding gets to Perform at its best producing good long term returns with minimum volatility & thereby a great investment experience (GIE)
I rest my case
