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5 reasons to choose balanced advantage funds

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Market volatility can be a daunting for new investors. Experienced investors, on the other hand, know that volatility is not something to be feared, but can be used to one’s advantage. The trick is to identify an investment plan that can adjust its portfolio quickly based on ever-changing market conditions. Enter balanced advantage funds, which are hybrid schemes that can dynamically allocate assets between equity and debt instruments.

  • Table of contents
  1. What are balanced advantage funds?
  2. Factors to consider while investing in balanced advantage funds
  3. FAQ

What are balanced advantage funds?

These plans invest in a mix of stocks and debt instruments. This means fund managers can adjust the scheme’s risk exposure to match the current market conditions by changing the allocation between equity and debt. In this way, balanced advantage funds seek to offer investors an optimal return potential over long term while mitigating risk factors. These plans, also known as dynamic asset allocation funds, can prevent significant capital erosion during changing markets and deliver potential returns over time.

So, should you add a Balanced Advantage Fund (BAF) to your portfolio?

Here are 5 reasons you should:

  1. Balanced risk-return profile: Balanced Advantage Funds strive to strike a balance between risk and return. These funds dynamically allocate assets between equity and debt instruments based on market conditions. When markets are bullish, they tilt towards equities to harness potential gains. Conversely, during bearish phases, they shift towards debt to provide relative stability and downside mitigation. This dynamic allocation strategy helps mitigate market volatility, making them a suitable option for investors who are risk averse.
  2. Adaptive to market trends: One of the key strengths of balanced advantage funds is their adaptability to changing market dynamics. Fund managers employ a tactical asset allocation strategy, leveraging their expertise to make timely shifts between asset classes. This proactive approach ensures that your investments are positioned to capitalize on potential opportunities while offering relative stability against market downturns. By staying in sync with market trends, balanced advantage funds aim to optimize the return potential across different market scenarios.
  3. Tax efficiency: For savvy investors, tax efficiency is a crucial consideration. Equity-oriented plans held for over 1 year qualify for long-term capital gains tax. This can be a significant advantage for investors looking to maximize their post-tax returns.
  4. Professional expertise and diversification: Like other schemes, investing in balanced advantage fund also allows you to access the expertise of seasoned fund managers. These professionals possess a deep understanding of the financial markets and use it to make informed investment decisions. Furthermore, these funds spread their investments across a diversified portfolio of stocks and debt instruments. The diversification helps spread risk and minimizes the impact of underperformance in any single asset, thus enhancing the overall stability of your investment.
  5. Avenues for capital appreciation: Balanced advantage funds can be an option for investors seeking diversification. While the equity component offers potential for capital appreciation, the debt component ensures mitigation of downside risk.

Factors to consider while investing in balanced advantage funds

  • Risk tolerance and investment horizon: Assess your risk appetite and investment horizon. This will help determine the appropriate allocation between equity and debt within the fund.
  • Expense ratio and other costs: Evaluate the fund's expense ratio and any associated costs. Lower expenses can have a positive impact on your overall returns.
  • Alignment with financial goals: Ensure that the investment aligns with your specific financial objectives, whether it's wealth accumulation, regular income, or long-term wealth preservation.


In conclusion, balanced advantage funds present a good option for investors seeking a balanced and dynamic approach to wealth creation over the long term, thanks to their balanced risk-return ratio. With their adaptive nature, tax efficiency, and professional management, these funds have earned their place as a valuable addition to any well-diversified investment portfolio.


What is the investment strategy of a balanced advantage fund?
Balanced advantage funds dynamically allocate assets between equity and debt based on market conditions. The aim is to optimize returns over the long term while managing risk.

How does a balanced advantage fund differ from traditional equity or debt funds?
Unlike fixed allocation funds, balanced advantage funds adapt to market valuations, shifting between equity and debt to capitalize on opportunities and mitigate impact against downside risks.

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.