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How does Bajaj Finserv Balanced Advantage Fund leverage behavioural finance?

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Behavioural finance is the study of how human emotions and cognitive biases impact financial decision making. It recognises that people do not always act rationally when it comes to money matters. Thus, mutual funds that incorporate insights from behavioural finance can help investors overcome their cognitive and emotional hurdles. One such fund is the Bajaj Finserv Balanced Advantage Fund, which leverages behavioural finance principles to manage risks and maximise the return potential for investors. Read on to learn more about how to leverage balanced advantage fund in behavioural finance and how does Bajaj Finserv Balanced Advantage Fund leverage behavioural finance.

  • Table of contents
  1. What is Bajaj Finserv Balanced Advantage Fund?
  2. Dynamic Asset Allocation based on market conditions
  3. Limiting loss aversion through downside risk management
  4. Benefiting from ambiguity aversion
  5. Strengthening the buy-and-hold approach
  6. Harnessing positive psychology
  7. FAQ

What is Bajaj Finserv Balanced Advantage Fund?

Bajaj Finserv Balanced Advantage Fund is an open-ended hybrid scheme offered by Bajaj Finserv Mutual Fund. The fund aims to generate capital appreciation by dynamically managing its equity and debt allocation based on market conditions. The scheme endeavours to participate in equity upside while providing some downside mitigation through its debt holdings.

Dynamic Asset Allocation based on market conditions

One of the key ways the Bajaj Finserv Balanced Advantage Fund leverages behavioural finance is through its dynamic asset allocation strategy. The fund actively shifts its allocation between equity, debt and money market instruments based on prevailing market conditions. This helps address the behaviorally inspired tendency of investors to sell after market declines and buy after market rises.

By dynamically rebalancing the portfolio, the fund can buy more of one asset class when its valuation becomes attractive relative to others. This counteracts the recency bias where investors extrapolate recent trends far into the future. The dynamic allocation also prevents investors from panicking and exiting equity markets during periods of volatility. Overall, it aims to participate in market upside while mitigating impact of volatility.

Limiting loss aversion through downside risk management

Loss aversion, the tendency to prefer avoiding losses over acquiring equivalent gains, is another key cognitive bias that impacts investing. To address this, the Balanced Advantage Fund focuses on actively managing downside risks. It uses debt, money market instruments and hedging strategies to create a cushion against falling markets. During periods of heightened volatility and drawdowns, the equity allocation is reduced in favour of relatively stable assets. This limits actual losses experienced by investors and prevents them from making hasty decisions driven by the pain of losses. By managing risks dynamically, the fund helps investors stay invested for the long term through market cycles.

Benefiting from ambiguity aversion

Another driver of poor financial decisions is ambiguity aversion, where people prefer known small losses over uncertain outcomes. The Bajaj Finserv Balanced Advantage Fund addresses this by following a disciplined and transparent investment process. Its dynamic approach provides clarity on asset allocation shifts. As it is actively managed, investors understand the fund is adjusting to changing market conditions rather than following a fixed strategy. This reduces uncertainty around outcomes. Clear communication on the fund's objective and process helps to further address ambiguity aversion among investors.

Strengthening the buy-and-hold approach

Behavioural finance research shows people generally have a buy-and-sell discipline. They buy after markets have risen and sell after declines, leading to poor returns. The balanced advantage fund strengthens buy-and-hold behaviour in three ways.

First, its dynamic allocation approach prevents panicked exits during volatility. Second, the downside mitigation via debt limits losses during downturns. This shields investors from negative emotions driving selloffs. Third, the fund adopts a long-term investment horizon aligned with compounding returns. By addressing various biases, it encourages disciplined long-term investing.

Harnessing positive psychology

Finally, the Bajaj Finserv Balanced Advantage Fund leverages positive psychology, which focuses on enhancing well-being and performance. Keeping investors invested during drawdowns shields them from stress, anxiety and fear caused by major losses. Positive emotions like hope and optimism are built by communicating the fund's ability to navigate periods of uncertainty. Regular updates on its disciplined process further enhance confidence in achieving long-term financial goals. This contrasts with the sense of lack of control, inadequacy and distress that often leads investors to make sub-optimal decisions. By empowering investors with a sound investment vehicle, their mental wellness is also supported.


The Bajaj Finserv Balanced Advantage Fund effectively leverages insights from behavioural finance. Through its dynamic allocation approach, downside risk management, clarity of process and focus on positive psychology, it addresses several cognitive and emotional hurdles faced by investors. By seeking to protect investors from their own biases, it allows them to stay invested for the long run to achieve their financial objectives. Its approach of balancing risk and returns through behaviourally aware strategies makes it a robust investment solution and a good choice for mutual funds investors online. For a detailed scheme information, click here.


How is the asset allocation managed in Bajaj Finserv Balanced Advantage Fund?
These funds maintain a flexible asset allocation strategy between equity and debt depending on the prevailing market conditions.

Who should opt for balanced advantage funds?
Balanced advantage funds are suitable for investors seeking a balanced mix of growth potential and risk management within a single investment vehicle.

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.