Everyone takes different approaches to mutual fund investments based on their budget, goals, and risk profile. Some focus on equities, while others prefer the stability of bonds. And there are investors who want the best of both worlds: the chance to capitalise on high-growth stocks while mitigating risk with bonds or other fixed-income investments. This is where balanced advantage funds (BAFs) can help.
Balanced advantage funds are hybrid mutual funds providing exposure to both debt and equity markets with greater flexibility. It enables fund managers to actively seize market opportunities with increased flexibility through dynamic asset allocation or the ability to rebalance the fund portfolio quickly as market conditions fluctuate.
Given the importance of balanced advantage funds in an investor’s portfolio, here is how you can invest in these funds and make them a part of your investment strategy.
Steps to invest lump sum in balanced advantage funds online
To get started, register online on the website of your selected fund house or through a mutual fund investment app. During registration, you may be asked to provide personal details, proof of identity/address, PAN card information, etc., as per requirements.
After completing registration:
- Open the mutual funds’ section.
- Go through different types of mutual funds under the balanced mutual funds’ category and select the fund that aligns with your risk tolerance and financial goals.
- Choose the lump sum option as the investment method.
- Enter the amount.
- Click on ‘invest’ or ‘proceed’ to complete the transactions.
Benefits of investing in balanced advantage funds
- Equity exposure for long-term capital appreciation
A balanced advantage fund allows you to benefit from long-term capital appreciation potential due to its equity exposure. The fund’s dynamic asset allocation ensures that it remains invested in the stock market during bull phases and reduces exposure during bear phases, eliminating the need to make those decisions yourself. This makes it an ideal choice for those looking for long-term capital appreciation but who don’t want to be actively trading stocks or timing the market by themselves.
- Stability through debt
During a bear market, the fund manager may shift assets towards more conservative investments, like bonds and fixed income. This helps protect your portfolio from significant losses and allows it time to recover when the market eventually rebounds.
- Deals with market volatility
Balanced advantage funds help reduce volatility by adjusting their asset allocation at strategic points throughout market cycles to ensure that investors don’t miss out on major opportunities. For example, when stocks are undervalued, the fund managers purchase them and hold them until they have reached higher levels before selling them off. This type of strategy helps reduce some of the risks associated with investing during periods of market volatility and ensures a balanced investment portfolio is maintained for the best possible return.
- Require less monitoring
Balanced advantage funds require less monitoring on your part. This is due to the diversified portfolio structure of these funds, giving you a single investment solution covering different types of assets. As a result, you don’t have to keep tabs on numerous investments or track the performance of multiple securities– instead, you can use this time to focus on other areas of your financial planning.
Closing thoughts
Investment in balanced advantage funds could prove to be a prudent decision if it aligns with your goals. These funds offer a range of potential benefits such as capital appreciation, stability through debt funds, and hedge against market volatility. However, before investing, it is equally important to consider your risk appetite, return expectations, time horizon, and financial obligations thoroughly. Furthermore, it would also be beneficial to take advice from an experienced financial advisor who can guide you through the whole process so that you can make an informed decision.
