Smart things to know about Dynamic Asset Allocation Funds

1. DAA funds are a mix of equity and debt investments with the objective of balancing the growth potential of equity with the downside protection of debt.

2. They change their weightage in equity and debt through a set of algorithms. They do away with the need to actively monitor and rebalance portfolio.

3. For some DAA funds, the algorithms are based on market indicators like PE ratio and other funds use their in-house ratios.

4. When equity valuations increase, these funds invest in debt. Declining market valuations will automatically trigger increase in allocation to equities, while reducing exposure to debt.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)