While these techniques are simple ones meant for individual investors, there is a very interesting mutual fund that practices an automated way of balancing between equity and debt and has built up a remarkable track record over six years of doing so. This fund is called the FT India Dynamic PE Ratio Fund of Funds and is run by Franklin Templeton. This is a hybrid fund that balances between the two asset types in a completely automated, algorithm-driven manner. The idea is to use the Price-Equity (P-E) ratio of the Nifty index to set the level of equity exposure that the fund should carry. Since the P-E ratio is a basic indicator of whether stocks are underpriced or overpriced, the approach decreases equity exposure as the markets rise up to a more risky level.

 

This sort of a thing takes a long time to bear fruit, but eventually, it does.