Home Markets Mutual Fund What is an Asset Allocation Fund?

What is an Asset Allocation Fund?

74
1
SHARE
Asset Allocation Fund

Since the financial market is volatile, we cannot risk all our investment in a single entity like bonds, equities or money markets. This is where Asset Allocation fund comes into the picture. A single mutual fund that can be invested in a variety of securities in different asset classes is termed as Asset Allocation Funds. This fund can give us diversity in investment and also a strong tool for risk management.

Balanced fund

One basic form of Asset Allocation fund is Balanced fund. Here an investor can buy a combination of common/preferred stocks and bonds under a single mutual fund. This also provides with both income and capital appreciation with respect to avoiding excessive risks associated with investing. Usually 60% of investment is done on stocks while the other 40% is invested on bonds but other percentage fixation is also available.

Generally they can be classified into two different Asset allocation schemes.

Strategic asset allocation scheme: This is a basic mix of investment. Here an optimal balance is achieved between investing in different options.

Tactical asset allocation scheme: Here the market and economic variations are tracked periodically and the asset allocation is changed depending on the investor’s options.

SHARE
Previous articleWhat are Agricultural loans?
Next articleDifference between Equity, Stock, Share and Security
I am more of an extreme introvert in an ambivert equation. I have a clan of totally amazing people who I love, but solitude and me-time are in good equilibrium. I am not anti-social. I am just differently social. I often fail at talking and put my thoughts on papers instead. Hopefully, I find my voice through writing, and maybe one day I will be heard. You can reach out to me at [email protected]

1 COMMENT

  1. Asset allocation fund is one of the ways to generate high returns. As explained about it is high risk to invest money into a single entity rather a single mutual fund can be invested in different in a different asset class. In this kind of investment a investor has a chance of buying, a combination of stock and bond as the name itself indicates the asset allocation fund.

Comments are closed.