Invests In Balanced Advantage Funds For Dual Benefit Of Capital Appreciation And Stable Returns

The coronavirus outbreak in early 2020s resulted in unprecedented human as well as health crisis. As per the Global Financial Stability report, the financial system already bore a major jolt because of it. In fact the worsening of the Covid 19 pandemic brought at stake the global financial stability.

From an individual's perspective also, there was threat of job loss or salary cut, thus heightened uncertainty and instability was triggered in the wake of the pandemic.

Now though the situation has eased a bit, times are still uncertain and in such testing times you need to be proactive in your personal finances and investment journey. This said you have to be diligent with your investments and look for investment opportunities that besides offering safety to your capital also helps it grow at a good pace. Likewise, there is a category of mutual funds known by the name Balanced Advantage Funds (BAF) that can serve both the purposes. Here is a brief description about the fund category and how it provides stability as well as growth to your financial portfolio:

What are Balanced Advantage Funds?

Balanced advantage funds (BAFs) are a new breed of mutual fund category that show a degree of variance from the balanced funds category. These are typically hybrid funds that invest in both debt and equity with no threshold limit of exposure on any of the asset class. Simply stating they in view of the market valuation, shift the investor's corpus from equity to debt in conditions when the markets are on the peak and viceversa. Some of the AMCs also refer them as dynamic asset allocation fund category.

How do Balanced Advantage funds offer growth and protect your capital at the same time?

This question is rather straight as mentioned above the fund category moves in and out of the asset class basis the market movement. So, in case there is a view that markets will boom going ahead, then an investor's corpus allocated to bonds/debt will be moved to equity for higher returns and likewise, if the markets are seen to peak, mutual fund managers' as per their discretion may move the sum out of equities to safeguard the gains as well as initial capital.

Features of Balanced Advantage Funds

Dynamic allocation: As does the other name for the fund category i.e. Dynamic Asset Allocation fund suggest these funds are not bound by any investment allocation mandate as in the case of pure balanced fund. So, considering the market valuation and outlook, these funds can raise or cut allocation to any of the asset class at any given point on a dynamic basis.

Inbuilt mechanism helps to offset volatility: The fund's intrinsic or in-built functionality of dynamic allocation comes of as help in effectively managing the volatility while buying stocks when they are low on valuations and selling them when they are at higher levels.

Balanced Advantage fund offer stable growth: When compared to pure-play equity funds, balanced advantage funds reap far more stable returns. Also, it is worth mentioning that during times when the indices reap negligible returns, these BAFs tend to outperform the indices by a sharp margin.

So, as these funds offer stability to your portfolio and can even offer inflation-beating returns over a tenure, you can consider investing in these balanced advantage funds. Say, you can lap up Axis Balanced Advantage Fund that aims to realize the dual goal of capital appreciation by deploying funds in a portfolio of equity or equity related investments and at the same generating income via investment in debt and money market instrument. Further, the fund category efficiently manages risk via active asset allocation.

Mutual Fund Investments are subject to market risks, please read all scheme related documents carefully