We all wish to invest our money, achieve our financial goals and have a happy and secure future. But before we invest, it is important to improve our understanding of different investment instruments - what they are, how they work and how will they help you build a secure future - before taking any decision with our investments.
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In this article, we will aim to understand Balanced Advantage Funds - what are they, how do they work, why should you invest in them and how they can help secure your financial future. So let's begin.
What are Balanced Advantage Funds?
Balanced Advantage Funds, or Dynamic Asset Allocation Funds, are a category of Hybrid Mutual Fund Schemes as specified by Securities and Exchange Board of India (SEBI). These group of funds invest in asset classes like Equity and Debt, and constantly keep modifying their asset allocation based on the market valuations and conditions.
These mutual fund models work well to eliminate human biases during investment decision making, and also aim to maintain exposure to equity derivatives to implement hedging strategies.
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Read more: A Beginner's Guide to Investing In Mutual Funds
Why Balanced Advantage Funds?
Create Long-Term Wealth
These schemes invest in stocks and other Equity instruments with the goal of creating long term wealth. Investment in equities would get investors market linked returns that may help beat inflation.
Manage Overall Risk
Investments in Debt securities are generally less risky than equity with a moderate return potential. This may help reduce the overall risk of the portfolio and endeavour to limit losses during steep market corrections.
Manage Volatility
A dynamic asset allocation strategy helps these schemes adjust their Equity and Debt investment levels as per different market conditions.
Read more: 5 Things to Consider Before You Start Investing
Advantages of Balanced Advantage Funds
- The strategy focuses on buying and selling assets based on valuations.
- By investing across asset classes your portfolio risk is diversified.
- Performing asset classes can make up for the returns of underperforming ones.
Who Should Invest?
Balanced Advantage Funds can offer benefits to all types of Long Terms Investors:
- Investors looking for a more aggressive alternative to pure Debt Funds.
- Investors who want to invest in Equity for higher return potential, while limiting their losses in case the markets fall.
- Investors seeking to reduce risk, invest in a diversified portfolio and leave asset allocation to an expert.
- First Time Mutual Fund investors, looking for a long term investment avenue for wealth creation.
Always remember to make informed investment decisions and invest an appropriate amount as per your goals and risk appetite.
(Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully.)
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