Need for tailored dynamic asset allocation solutions outside of BAFs/hybrid funds stems from two reasons: (1) MFDs desire to demonstrate their own value add to their clients rather than simply distributing products, and (2) greater involvement of MFDs in cap-size based dynamic allocations rather than depending solely on hybrid funds – which generally tend to be more large cap heavy.
Gold should ideally be kept outside your financial portfolio. Start doing a SIP in a gold fund as soon as your daughter is born, to accumulate a desired quantity of gold by say her 25th birthday.
Mister Bond’s BAF equivalent solution decides equity allocation based on trailing PE and trailing PB, among other factors. His time-tested equity to BAF to equity allocation model based on extreme valuations on both ends continues to protect downside and ride the upside better than a pure BAF product.
He has now introduced ValueShastra – a unique model that optimizes allocation between large, mid and small caps based on his proprietary algorithm. His algo maximizes allocation to small caps when market valuations are in green zone (very attractive) and moves progressively to midcap and then to large cap as valuations rise – a model that goes against conventional wisdom of dipping your toes only in large caps at market bottoms when sentiment is lowest. Back-testing of this model suggests that this can well be a winning strategy.
Sunil argues that even for goal based investments, you cannot afford to stay with SIP karo – bhool jaao. You have to manage the accumulated corpus from years of SIPs dynamically, to protect painstakingly accrued gains from market crashes when valuations become too high.