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How Bajaj Finserv Multi Asset Allocation Fund uses dividend-yield investing to optimise growth potential

by Busines Newswire
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Bajaj Finserv Asset Management Ltd. on May 13th, 2024, launched the  Bajaj Finserv Multi Asset Allocation Fund, an open-ended scheme that invests in equity, debt and commodities.

The fund is equipped with growth and dividend boosters, following a dividend-yield investing strategy that seeks to optimise return potential in the long term.

The New Fund Offer period, where the fund is opened to investors for the first time, is on till May 27th.  Investors can purchase units at the face value of Rs 10 during the NFO.

Dividend-yield investing

As part of its dividend-yield investing strategy, the Bajaj Finserv Multi Asset Allocation Fund will focus on stocks or securities that pay higher dividends than the Nifty 50 index. Such companies tend to have stable business models and a track record of sustainable growth.

Dividend yield is a measure of how much a company pays out in dividends each year relative to its stock price. It’s calculated by dividing the annual dividend per share by the current stock price.

These dividends, when reinvested, can potentially enhance return potential by providing more opportunities for compounding growth in the long term.

Compounding is the process where the earnings on an investment are reinvested to generate additional earnings over time. This snowball effect can lead to significant and accelerated growth over the long term.

The equity portion for the Bajaj Finserv Multi Asset Allocation Fund will also follow a multi-cap, multi-sectoral and multi-theme approach. This can further optimise return potential while mitigating against the risk of over-concentration in one segment.  Additionally, fund managers will seek relatively low volatility in the portfolio by focusing on companies with a history of sustainable growth.

Hedging against volatility

The scheme will seek to use its debt portion to enhance portfolio stability. It will allocate 10% to 55% of its portfolio to debt, following a dynamic duration management strategy. This will involve adjusting the duration of the portfolio in response to interest rate changes to potentially mitigate risk and leverage different interest rate environments.

The commodities segment will comprise 10% to 55% of the portfolio and will provide exposure to gold ETFs, silver ETFs, and exchange-traded commodity derivatives to potentially act as a hedge against equity volatility while providing growth potential. It may also allocate 0% to 10% to REITs/InvITs.

The portfolio will be dynamically managed, allowing the fund manager the flexibility to adapt the allocation ratio between the three or more asset classes based on market conditions.

How to invest

Investors can purchase units for Rs 10 during the NFO period and at the Net Asset Value when the fund reopens for subscription.  Minimum investment amount for lumpsum and SIP is Rs 500 respectively. Investors can purchase units through their distributors, digital channels, or directly through Bajaj Finserv Asset Management Limited.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.