Balanced Advantage Funds offer investors a unique opportunity to achieve their financial goals by combining the potential for growth and income in one investment.
With dynamic asset allocation strategies, professional management, and a mix of stocks, bonds & other fixed-income securities, these funds offer a convenient solution for those looking for a well-rounded investment portfolio.
Read this article to know more about balanced advantage funds and what are the best funds to invest in.
WHAT ARE BALANCED ADVANTAGE FUNDS?
The Balanced Advantage Funds are a type of mutual funds also known as Dynamic Asset Allocation Funds are a type of mutual fund that invests in a mix of equity and debt securities.
But unlike regular hybrid funds, which keep allocation between equity and debt within certain prescribed limits, balanced advantage funds have no fixed limits.
They can move their allocations more dynamically depending on the prevailing stock market conditions.
These funds can even invest 90% in equity while even an aggressive hybrid fund has a 65-80% limit on equity.
Fund manager of these funds, continuously monitors market conditions and adjusts the fund’s holdings to ensure that the mix of securities aligns with the fund’s investment objective.
They reduce the investments in equity when the markets trade at the higher valuations by increasing investment in debt and tilt the allocation towards equity when stocks are available at cheaper valuations.
TOP BALANCED ADVANTAGE MUTUAL FUNDS
Here are some Balanced Advantage Funds to consider for your portfolio:
|Ranking||Mutual Funds||3 year Returns||5 year Returns|
|1||HDFC Balanced Advantage Fund – G||16.95%||10.33%|
|2||Aditya Birla Sun Life Balanced Advantage Fund – Regular Plan – G||10.17%||8.10%|
|3||ICICI Prudential Balanced Advantage Fund – Regular Plan – G||11.05%||9.39%|
|4||Nippon India Balanced Advantage Fund-Growth Plan-G||10.07%||7.31%|
|5||Kotak Balanced Advantage Fund -Regular Plan -G||9.74%||–|
|6||Edelweiss Balanced Advantage Fund – Regular Plan – G||13.40%||9.96%|
WHO SHOULD INVEST IN THESE FUNDS?
- Long-term investors.
You need to have a minimum 3-5 years of investment horizon for investing in balanced advantage funds. If you are a moderately aggressive investor, you can expect relatively good returns in long-term.
- Investors seeking moderate returns with low risk factor.
The returns of balanced advantage funds would not be like pure equity funds, but might outperform fixed income funds.
It is ideal for investors who want a steady stream of income while also preserving their capital.
- Investors with low-risk appetite.
As balanced advantage funds also invest in debt securities along with equity depending on market situations, the risk of capital erosion is relatively lower making it a good bet if your risk tolerance is moderate.
- Retirement investors.
Investors who are close to or in retirement can find these funds most suitable as the auto mechanism of asset allocation ensures risk reduction and better returns as compared to fixed income products.
HOW TO INVEST ONLINE?
- STEP 1- Download the SPA Capital App (Available on Android & Apple Store)
- STEP 2- Create your profile.
- STEP 3- Select any Balanced Advantage fund from the list of Funds
- STEP 4- Complete the payment process.
FACTORS TO BE CONSIDERED WHILE INVESTING IN BALANCED ADVANTAGE FUNDS
- Investment objectives of Balanced Advantage Funds
It is important to understand your investment objectives before investing in balanced advantage funds.
Do you want a steady source of income, capital appreciation, or a combination of both? If you are willing to take some level of risk for returns higher than fixed income funds, these funds can be a good addition to your portfolio.
- Risk tolerance in Balanced Advantage Funds
Balanced advantage funds are considered to be less risky than investing in pure equity funds, but they still come with some level of risk.
The equity component of these funds makes them vulnerable to equity market risks.
- Expense ratio of Balanced Advantage Funds
Expense ratio is the fee charged by the AMCs for managing the funds sales, marketing, transaction costs etc. as a percentage of the fund’s NAV.
As these funds are professionally managed, they typically have higher expense ratios than various other types of mutual funds.
Therefore, it’s important to compare expense ratios before investing in a dynamic asset allocation fund to ensure that you are getting the best value for your money.
ADVANTAGES OF INVESTING IN BALANCED ADVANTAGE FUNDS
- Lower volatility
By investing in a mix of stocks, bonds and alternative investments, balance advantage funds aim to reduce the volatility of returns.
This diversification helps to spread investment risk across various asset classes, reducing the impact of market fluctuations on the overall portfolio.
- Better inflation-adjusted long-term return
Balanced advantage fund invests in debt and equity dynamically, providing a debt cushion to battle market volatilities of equity markets.
The returns generated by these funds may be more stable than those generated by equity and can give better inflation adjusted long-term return than a typical debt fund.
It is advisable for those investors who want to take moderate risk while investing and are not comfortable with market volatilities.