How can small business owners utilise balanced advantage funds?

In the world of investing, a balanced advantage fund stands out as a unique and flexible option. This type of fund is a mix of both stocks (equity) and bonds (debt). The fund managers continuously evaluate the market conditions to adjust the proportion of equity and debt in the fund. This strategy is designed to minimise risk in unstable market conditions, while trying to get reasonable returns when markets are favourable.

By investing in a balanced advantage fund, small business owners can aim for potential growth through the stock investments while the bond investments can offer relative stability and regular inflow of funds.

Let’s take a closer look at how business owners can invest in balanced advantage funds and benefit from their investment strategy.

• Table of contents

1. Understanding the concept of balanced advantage funds
2. Why small business owners should consider investing in balanced advantage funds?
3. Factors to consider before investing in balanced advantage funds
4. Tax implications and considerations for small business owners
5. FAQ

Understanding the concept of balanced advantage funds

Balanced advantage funds offer a range of features that make them a suitable investment choice for small business owners.

Dynamic asset allocation: These funds dynamically adjust the mix of equity and debt based on market conditions. This flexibility allows the fund to capitalise on the growth potential of equities during bullish market trends and seek the relative stability of bonds during bearish phases. For a small business owner, this translates to a less volatile investment experience, providing relative stability in uncertain times.

Risk-reward spectrum: These funds strike a balance between risk and reward. By not being fully invested in either stocks or bonds at any given time, they aim to offer moderate returns with lower risk compared to pure equity funds. This reduces their overall financial risk exposure, which is crucial when business incomes fluctuate.

Flexibility: The fund’s flexibility in managing the proportion of equity and debt is a key advantage. This allows the fund to respond to market changes effectively. For a small business owner, this means the investment can adapt to their changing financial needs and goals over time.

Why small business owners should consider investing in balanced advantage funds?

Small business owners can consider balanced advantage funds as part of their investment strategy for various reasons.

• These funds provide a cushion against market volatility, which is crucial for business owners who need relative stability in their investments to focus on running their business.
• The dynamic asset allocation helps in capitalising on market upsides while mitigating downside risks, aligning with the often fluctuating nature of small business revenues.
• Some other reasons to consider investing in these funds are liquidity, flexibility, and tax efficiency.

The Bajaj Finserv Balanced Advantage Fund can be a suitable option for businesses considering this type of investment. Known for its investment strategy, the fund aims to provide a balance of growth and income with a focus on long-term capital appreciation and risk management. This makes it suitable for small business owners looking for a flexible investment solution that aligns with their unique financial goals. For a detailed scheme information, click here.

Factors to consider before investing in balanced advantage funds

Before investing in balanced advantage funds, it is essential to have a basic understanding of how equity and debt markets work, as these funds invest in both. Ensure that your business has sufficient liquid assets for daily operations before investing. Balanced advantage funds are better suited for long-term investment, given their market volatility management. Understand the tax implications to align with your business and personal tax strategies. Finally, align your investment with your financial goals, like retirement or business expansion.

Tax implications and considerations for small business owners investing in balanced advantage funds

Small business owners in India investing in balanced advantage funds should be aware of tax implications based on equity allocation. Funds with over 65% in equities enjoy lower long-term capital gains tax. Gains exceeding Rs. 1 lakh from these funds are taxed at 10% if held for over a year, while gains from shorter holdings attract 15% tax. Conversely, funds with less than 65% in equities are taxed as per the investor's income tax slab.

Conclusion

Balanced advantage funds offer a unique investment opportunity for small business owners, combining the growth potential of equities with the relative stability of debt. These funds dynamically adjust their asset allocation between equity and debt in response to market conditions, providing a balanced risk-reward profile. They also offer liquidity and tax efficiency, which are crucial for small businesses.

FAQs:

How do balanced advantage funds differ from other investment options?

Balanced advantage funds dynamically adjust their mix of equity and debt based on market conditions. These are actively managed funds that seek to provide a balance between risk and reward.

Can small business owners invest in balanced advantage funds with limited capital?
Yes, small business owners can invest in balanced advantage funds even with limited capital. These funds often have a low minimum investment requirement, making them accessible to investors with varying capital sizes.

What is the typical rate of return for balanced advantage funds?
The rate of return for balanced advantage funds depends on market conditions and the fund's asset allocation. Typically, they aim to offer moderate returns when held over the long term, balancing between the returns of equities and the relative stability of debt instruments.

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.