Want a safer investment option, choose Dynamic Equity Funds

Every investor wants to reap more returns by investing in the bearish markets and selling in bullish markets. To achieve this, Dynamic Equity funds are very useful. These funds switch among the various asset classes like equity and bonds according to market conditions to protect investors and assists them to reap more and more returns in every market condition.

Equity funds usually fully invest their corpus in the stock markets. But the Dynamic Equity funds adopt different strategies of investing by adjusting the asset allocation from equity to debt and debt to equity as per market momentum. Typically, these funds increase their equity portion in the portfolio when markets are down and vice versa when markets are up these funds reduce their equity portion of the corpus.

Many investors who are shifting their money from bank deposits to mutual funds are advised to subscribe to Dynamic Equity funds. The strategy of adjusting the asset allocation secures returns and at the same time reduces the risk. Dynamic Equity funds automatically rebalance the portfolios with the market conditions, so these funds are highly recommended to the first-time investor with a lower risk appetite. Also, the volatility in the returns of these funds is much lower than that of diversified funds.

One of the biggest advantages of these funds is their tax efficiency. These funds are structured in such a way that they are taxed as equity funds. That is whenever they lower their equity exposure they ensure the total equity portion including arbitrage investment should reach 65% of the portfolio value due to which they are considered as an equity fund. So, when these funds qualify for equity taxation, the investors holding the investment for more than a year are able to avail a tax exemption of long-term capital gain tax.

With these features, the Dynamic Equity funds form a great option for beginner investor and are safer compared to pure equity investment.