In the ever-changing environment, where we don’t know what tomorrow might bring, it’s essential to be ready for future unforeseen situations. Investing is one crucial thing that might help with this. Finding an investment option that balances risk & returns could be the most important parameter for several investors. Finding this particular feature in most funds is difficult. So, Balanced Advantage Funds have been introduced. They offer flexibility, diversification, and dynamic asset allocation, which might be some of the significant investment parameters an investor looks for in the funds. Investors looking to receive balanced returns from companies that perform well might invest in these funds as they are managed by investment professionals with many years of experience.
A balanced advantage fund invests in debt and equity but differs from a hybrid fund. A hybrid fund involves a specific quantity of equity and debt, but balanced advantage funds have no such criteria. Balanced advantage funds can be easily adjusted according to changes in equity and debt, making them flexible and adaptable to different market conditions. Let’s understand them better by looking at their features and advantages.
Features of Balanced Advantage Funds
Balanced Advantage funds diversify risks like any other funds but are not risk-free. This is why one must thoroughly research before investing and know what they are and how they work. Some basic features that can help identify these funds are as follows.
1) Potential to Provide Stable Gain
This happens because they invest in shares when markets perform well and shift to bonds when markets are unstable.
2) Helps Navigate Market Trends
Through a structured system, balanced advantage funds help decide where to put money based on market trends. This helps give investors a straight signal about where to invest and where to avoid.
3) Flexible Allocation of Assets
These funds keep adjusting their investments between bonds and shares based on the market conditions.
4) Lowering Risks
Due to these funds’ flexibility, they can adjust the portfolio according to the requirements, minimising risk.
These were some features. Now, let’s look at the funds’ advantages.
Advantages of Balanced Advantage Funds
All investments are made to gain the benefits associated with them. Similarly, even Balanced Advantage Funds offer several advantages. One can thoroughly research the funds, see if they match your financial goals, and then make an investment through the mutual fund investment app. The advantages are as follows.
1) Flexible Distribution
A balanced advantage fund offers the benefit of having a balance of equity and debt in a fund. Plus, one can adjust the allocation according to the market conditions, which may help obtain reasonable returns even in a volatile market.
2) Less Risk
As the name itself suggests, it’s a balanced advantage fund that provides an advantage of lowering the risk attached to the funds. It’s a mix of debt & equity, so it lowers the risk by moving the funds from equity to debt according to market conditions.
3) Tax Reduction
The funds are tax-friendly because of their dynamic allocation between equity and debt, which leads to lower tax liability on capital gains. Dividends from equity-oriented balanced advantage funds BAFs are tax-free for investors, and systematic transfer plans (STPs) can be used strategically to manage taxation while transitioning between debt and equity investments.
4) Potential to Get Consistent Gains
These funds protect investors from the market’s ups and downs by providing stable gains from debt investments. They also adjust the investments by adjusting debt and equity as and when necessary, which might help get consistent returns.
Conclusion
Balanced Advantage Funds offer significant benefits, making them a decent option for an investment. They facilitate flexible asset allocation, which may help increase potential returns in volatile markets. They also lower the risk of moving the funds from equity to debt when they don’t perform well. This may possibly help in getting returns in even volatile markets. These funds are a considerable option for investment. However, it’s crucial to conduct your own risk-return analysis before investing. This is because each investor’s goals and risk-taking abilities differ, making it essential to understand what suits them well and invest their money.
Note: Views and opinions contained herein are for information purposes only and should not be construed as investment advice/ recommendation to any party or solicitation to buy, sale or hold any security or to adopt any investment strategy. It does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising from the use of this information. The recipient should exercise due caution and/ or seek professional advice before deciding or entering into any financial obligation based on information, statement or opinion expressed herein.
Past performance may or may not be sustained in future.
Mutual fund investments are subject to market risks, so read all scheme-related documents carefully.
