Are your clients constantly badgering you with questions every time the market rises or falls even a little bit?
Is this behaviour a little overbearing for you sometimes?
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There are a few asset allocation based funds in the market. Most of them use parameters like P/E, P/B and dividend yield to decide the quantum of equity allocation in the fund, while the balance is invested in fixed income. DSP BlackRock has launched a fund that uses the yield gap model to decide the asset allocation. The model uses the ratio of the G-Sec yield & earning yield of NIFTY to determine which asset class is relatively cheap and which one is relatively overpriced. Based on this, an asset allocation decision is made.
What is the yield gap model & how does it help with asset allocation?
Now that you understand the concept of yield gap and how it works, watch Part 2 of our series to understand how yield gap can be used to implement a dynamic asset allocation strategy.
How can one implement a dynamic asset allocation strategy using yield gap?
