What are balanced advantage funds?

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Balanced advantage funds are a type of hybrid mutual funds that seek to strike a balance between equity and debt investments. These funds are designed to adapt to changing market conditions and can adjust their asset allocation accordingly.

The desired objective of a balanced advantage fund is to provide investors with a relatively stable return potential compared to pure equity funds while also offering the scope for capital appreciation.

Unlike traditional mutual funds, which maintain a fixed allocation to equities and debt, balanced advantage funds have the flexibility to vary their asset allocation based on market conditions.

For example, when markets are bullish and offer attractive opportunities, balanced advantage funds may increase their equity allocation to capture potential gains. Conversely, during market downturns, these plans may reduce their equity exposure and shift towards relatively stable debt investments to mitigate impact on capital.

Features of balanced advantage funds

  • Dynamic asset allocation: The main feature of balanced advantage funds is their dynamic asset allocation. Fund managers closely monitor market conditions and adjust the fund's mix of equities and debt accordingly. This active management can help investors handle various market phases, from bull markets to bear markets.
  • Risk mitigation: Balanced advantage funds are designed to be less volatile than pure equity funds. By incorporating debt securities in their portfolio, they aim to cushion the impact of market downturns. This makes them suitable for investors who seek less volatility alongside potentially reasonable returns.
  • Professional management: Balanced advantage funds are managed by expert fund managers, who employ make allocation decisions. The expertise of these managers can be crucial in adapting the fund portfolio to changing market dynamics.
  • Tax efficiency: In India, balanced advantage funds are treated as equity funds for tax purposes if they have at least 65% of their assets invested in equities. This can result in tax advantages, such as a lower tax rate on long-term capital gains.
  • Liquidity: Balanced advantage funds offer high liquidity, as investors can buy or sell units on any business day. This makes them a convenient choice for investors who may need to access their funds quickly.
  • Diversification: Balanced advantage funds invest in a diversified portfolio of stocks and debt instruments. The diversification helps spread risk and may potentially reduce the impact of poor performance in any single security or sector.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals, and horizon. This information is subject to change without any prior notice.