Fund of Fortnight

Fund of Fortnight

This is our mutual fund recommendation. Every fortnight , we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same. 



Reason for recommendation

The last fortnight of September witnessed huge volatility in the equity market. After posting a sharp fall, the equity market regained most of the ground quickly contrary to the expectation of most analysts. This shows the level of uncertainty in the equity market. The bond market, during this period, has remained calm. With heightened volatility in the equity market and improving bond prices, it makes perfect sense to park your money in a fund that invests in both equity as well as debt. This is the reason we have selected Edelweiss Balanced Advantage Fund as our fund of the fortnight. The fund invests in both equity as well as debt.

At the end of August 2020, it had invested 72 per cent in equity and 22 per cent in debt while the rest was in cash. Year till date fund has generated return of 9.2 per cent better than equity funds. The reason for such outperformance is the fund’s ability to contain its fall in the month of March 2020. The fund follows a pro-cyclical approach to decide equity allocation. The model uses price, flow and volatility-based indicators for its asset allocation. This resulted in its equity allocation increase from 50 per cent in March to 72 per cent by the end of August.

In equity the fund has major exposure to large-cap stocks followed by mid-cap stocks. What is comforting about the fund’s portfolio is it being overweight in terms of some of the defensive sectors such as technology, FMCG and healthcare. At the same time it is underweight on financials. In its debt portfolio the fund holds majority part of its corpus in commercial papers of NTPC. Looking at the fund’s larger exposure to equity, the fund is suited for a high risk-taking investor with investment horizon of at least two years.


 

 

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