Everyone who invests or wishes to invest in the stock market, has the psychology that they should buy at low and sell when the market is at high. But, for an individual or a new investor it is difficult to time the market or predict the next move. So, here comes the role of experts and analysts who have years of experience and are in a position to make diligent decisions. So, people look for a mechanism which makes this possible. And, therefore, the mutual fund industry provides such an option to the investors and that is called “Balanced Advantage Fund”.
Meaning of Balanced Advantage Mutual Fund
Balanced Advantage Funds are also known as Dynamic Asset Allocation Funds.
They are a category of Hybrid Mutual Fund Schemes that invest in Equity and Debt, and keep modifying their asset allocation based on the market valuations.
There is an active management based approach which means the equity and debt ratio is changed according to the market.
When the equity markets decline, such funds will increase allocation to equity and vice versa to generate an optimum return with minimum risk for the investors.
If you are a first time investor then you can prefer to invest in a balanced advantage fund in which you get low volatility. Also, you can avoid timing of the stock market as the fund managers are actively managing the fund.
How it works ?
As per SEBI, there is no condition on the percentage of investment that is to be made in equity and debt. This depends on the AMC and the fund managers to take the decision according to market conditions.
The AMCs in such a case have a predefined model which they follow. So, according to that model, if they find that the markets have become expensive after a certain level, they can reduce the equity exposure and if, according to the model they find that the markets are down and the deal is profitable, they increase the equity exposure.
So, there is no emotional bias.
But, before you invest in a balanced advantage fund, you should not only see the returns but you should have a look at the portfolio of the scheme.
To know more about the magic of a balanced advantage fund or to invest in it, contact us.