Loading
Market Intelligence › Basic Terminologies
The dynamic asset allocation model, and its limitations
Published by The Retail Trader · JUL 31, 2026 · Mutual Funds & AMC
A balanced advantage fund keeps changing its own allocation between equity and debt. Its promise is that it will cut equity in an expensive market and raise it in a cheap one.
Every fund has its own model, often based on valuation — such as the market's overall price to earnings or price to book level.
According to that model the equity allocation keeps moving up and down, and it leaves you with nothing to do.
This category is not uniform at all:
• Every fund's model is different, so two funds can behave completely differently.
• The model works only when the market behaves according to it — that too is an assumption.
• Many funds hedge with derivatives to keep equity status for tax purposes.
• Its return will be neither fully like equity nor fully like debt — in both directions.
This category is made for people who cannot rebalance on their own. If you can maintain your own allocation, the same job gets done more cheaply and more transparently with two simple funds.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed by the exchanges, SEBI and RBI from time to time, so verify every number yourself with your broker or the official source.