Parag Parikh, Dynamic Asset Allocation Fund, is an open-ended dynamic asset allocation fund launching on Feb 20th. We discuss who can consider investing in the fund.
According to the scheme flyer, “The fund will predominantly invest in debt instruments and endeavour to maintain equity allocation between 35% and 65%* (some of it will be hedged via approved derivative instruments as permitted by SEBI from time to time)”.
* The fund can, in principle, change equity allocation from 0 to 100%
The flyer also says: “We recommend it to those:
- Desiring debt allocation with indexation benefits
- Preferring to outsource the task of managing the complexities involved in debt investing.
- Who refrain from actively trading in debt securities with the intention of profiting from interest-rate movements.”
The scheme can invest in all types of debt securities like Sovereign, State Government, PSU and corporate securities across all maturities – (including securitised debt) and money market instruments.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥 🔥
The bond holdings can be both ‘accrual’ and ‘duration’ based. That is both short-term debt, which is held until maturity and long term debt, which can be traded mid-way for capital gains or as per market conditions.
According to the flyer, the equity investments will (a) focus on choosing stocks possessing a ‘margin-of-safety’, (b) prefer stocks with strong cash flows (higher Income Distribution cum capital withdrawal payout/buybacks), and (c) avail ‘special situations’ as well as arbitrage opportunities whenever they arise.
Context: In March 2023, govt announced several amendments to the finance bill 2023. Among the changes is the change in taxation status for debt mutual funds. Funds holding less than or equal to 35% equity will be taxed as per slab, regardless of the age of the MF unit sold.
This makes AMC’s earlier offering, Parag Parikh Conservative Hybrid Fund, always taxable as per slab. I expected the AMC to change the mandate of the conservative hybrid fund to make it tax-friendly.
Gains from funds holding less than 65% Indian equity but more than 35% Indian equity purchased on or before 3Y are short-term gains and taxed as per slab, and gains from older units are taxed at 20% with indexation (long-term capital gains).
However, they have opted to launch the Parag Parikh Dynamic Asset Allocation Fund for reasons known only to them. The NFO will still be a debt fund with indexation benefits for long-term capital gains.
Who should invest in the Parag Parikh Dynamic Asset Allocation Fund?
Investors should know that Parag Parikh Dynamic Asset Allocation Fund will be volatile considering its long-term bond and equity holdings. So, while it may occasionally give exceptional returns, it may not last long. Therfore, the fund is recommended only for long-term holding.
- Those far from retirement and already investing in their conservative hybrid fund may consider Parag Parikh Dynamic Asset Allocation Fund a tax-friendly alternative (see below for my decision), although it may or may not be an exact match in strategy. The main difference (aside from variable asset allocation) is the new fund cannot invest in REITs/InvITs.
- Also, the scheme’s benchmark is the CRISIL Hybrid 50+50 Moderate Index. So, this may hold higher unhedged equity than the conservative hybrid fund. We recommend retirees invested in their conservative hybrid fund wait and watch for a few months before taking a call on shifting. If the equity allocation is higher, we do not recommend a shift.
- Experienced investors can watch the fund’s portfolio for a few months and consider this for their long term portfolios.
- We do not recommend using it for short-term goals – less than five years.
- New investors must not be in a hurry to invest. They can wait and see the portfolio and performance (risk and returns) for a while before considering it.
My plan: Readers may know I am invested in the Parag Parikh Conservative Hybrid Fund. See:Why I started to invest in Parag Parikh Conservative Hybrid Fund. I continued to invest in the fund after the March 2023 taxation amendment mentioned above.
I will now divert fresh investments into the Parag Parikh Dynamic Asset Allocation Fund to reduce my tax burden without too much change in the investment risk profile. I want to caution readers that this move is suited to my circ*mstances. This is neither a recommendation nor an endorsem*nt. Kindly review your circ*mstances before investing.
Do share this article with your friends using the buttons below.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool!=> Track your mutual funds and stock investments with this Google Sheet!
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth!
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter with the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Most investor problems can be traced to a lack of informed decision-making. Wehave all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about?As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want 
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)
