Avoid hard knocks in equities with dynamic funds

When the equity markets are rallying, investors often make the mistake of abandoning their asset allocation. They don’t book profits, and in fact, pour more money into equities. When the market cycle turns, the portfolios of such investors take a big hit. Again, when markets are down and stocks are available at cheap valuations, investors stay away. All this happens because emotions like greed and fear govern decision-making. Dynamic equity funds aim to protect investors from such behavioural weaknesses. Motilal Oswal Asset Management Company (AMC) has launched a new fund offer (NFO) in this category called Motilal Oswal MOSt Focused Dynamic Equity Fund.

This type of fund changes its allocation to equities and debt depending on market valuations, raising it when markets are down and lowering it as markets move up. The new fund will use an in-house valuation parameter, the Motilal Oswal Value Index, an equal-weighted index created using the price-to-earnings ratio, price to book value ratio, and dividend yield of the Nifty.

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