Investment Blog

Imagine you have invested 50% of your money in the Nifty Index Fund portfolio.

And another 50% in a mutual fund portfolio with an average of 50% debt allocation and 50% in equity allocation.

Which part of your investment would have generated higher returns in the last 10 years?

You would say obviously the first portfolio which has 100% equity allocation because equity performed far better than debt in the last 10 years.

What if I tell you, you are wrong?

Here is an interesting fact – ICICI Pru Balanced Advantage Fund-Direct Plan-Growth (BAF) delivered returns of 14.11% while the Nifty Index Fund-Direct Plan generated returns of 13.83% in the last 10 years (as on 31 Aug 2022).

And the best part is that the ICICI BAF could do this by keeping a 53% average debt allocation.

That means you got better returns from ICICI BAF over Nifty by taking 50% lesser risk!

How could ICICI BAF do it?

Simply, by applying a dynamic asset allocation plan – increase equity allocation when equity gets cheaper and reduce equity allocation when it is expensive compared to historical standards.

Many investors do not realize the importance of asset allocation which contributes 80% of the outcome of the overall return. The remaining 20% comes from scheme selection.

We at Truemind create customized dynamic asset allocation plans for our clients with the sole objective of generating higher returns at a given level of risk.

We all know higher the risk, the higher the returns. However, dynamic asset allocation is key to generating higher returns at a lower level of risk.

Now, who doesn’t want higher returns at lower risk?

PS: ICICI BAF is just taken as an example. It is not a recommendation.

Originally posted on LinkedIn: www.linkedin.com/sumitduseja