When it comes to investments, she only has her PPF account, a couple of bank deposits and some equity stocks, which were a gift from her father.To ease her initiation into mutual fund investing, her adviser has suggested a balanced fund to her, while her friend recommends a dynamic asset allocation (DAA) fund. Which of the two should she choose?To begin with, Gayatri must understand that balanced funds and DAA funds differ in their approach to juggling proportions. While balanced funds maintain a steady exposure to equity and debt (a minimum of 65% and maximum of 80% allocation to equity), DAA funds are much more flexible. They can invest between zero and 100% in either equity or debt.Simply put, a DAA fund can become a 100% equity fund if equity is expected to do well. Balanced funds typically maintain a 65% exposure to equities, and qualify for better tax treatment compared to dynamic funds.

Source: Economic Times January 23, 2017 01:01 UTC