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It is often said that it is impossible to time the market. If that is so, then what is the use of a dynamic asset allocation fund or a balanced advantage fund, which shifts its exposure between debt and equity based on market conditions.
- Neeraj
Your viewpoint is absolutely fine and I agree with you on this. It is often said that timing the market is very difficult but not impossible. If some people are able to do it, then I don't know them. When it comes to dynamic asset allocation funds, then there is no use of them, too. In fact, if these funds are observed over a full market cycle, they have not been able to time the market perfectly.
However, one fund that is a very rule-based fund, Franklin India Dynamic PE Ratio Fund of Funds, tends to do well during the unexpected market fall. It tries to base its asset allocation on the level of the P/E ratio of the indices. So, it has succeeded a bit mainly because of this rule, not for its fund manager.
Nobody has timed the market to perfection and that is why, these dynamic asset allocation funds have not been able to build a credible track record. This only reinforces the point that timing the market can't be done well.
This article was originally published on April 26, 2019.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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