Balanced Advantage Funds: A Dynamic Approach to Asset Allocation
When it comes to investing in mutual funds, one category that stands out is Balanced Advantage Funds, also known as Dynamic Asset Allocation Funds. These funds offer investors the flexibility to allocate their investments across different asset classes, such as equity and debt, without any restrictions. Unlike other hybrid funds, Balanced Advantage Funds do not adhere to a predetermined asset class allocation ratio, giving fund managers the freedom to adjust the allocation based on market conditions.
As per SEBI guidelines, these funds can invest up to 100% in equity and equity-related instruments, as well as debt categories. This allows fund managers to make strategic decisions based on their assessment of market valuations and potential opportunities. For instance, if stocks are available at attractive valuations while the scheme has a higher allocation to gold and fixed income instruments, the fund manager can sell some debt assets and invest the proceeds in equity assets.
Benefits of Investing in Balanced Advantage Funds
There are several compelling reasons why investors may consider including Balanced Advantage Funds in their investment portfolio:
- Flexibility: Unlike other funds with fixed allocation ratios, Balanced Advantage Funds offer the advantage of dynamic asset allocation. This means that the fund manager can adjust the portfolio to optimize returns based on changing market conditions.
- Diversification: By investing in both equity and debt, Balanced Advantage Funds provide investors with exposure to the potential growth of equity markets while also offering the stability of fixed income instruments. This helps in reducing downside risks.
- Active Management: If an investor prefers active mutual funds over passive schemes like index funds, Balanced Advantage Funds can be a preferred choice. The ability of fund managers to actively change asset allocation allows for better risk management and potential outperformance.
It’s important to note that investors should consider Balanced Advantage Funds for long-term financial goals rather than using them for short-term goals. As of 31st July, the Balanced Advantage Funds category had total assets under management (AUM) of Rs 2,11,100 crore across 29 schemes. Over the last 3 years, this category has delivered an average return of 13.19% and 9.18% over the last five years.
Top Balanced Advantage Funds in the Market
Among the top performers in this category are:
- HDFC Balanced Advantage Fund with assets of Rs 60,880 crore
- ICICI Prudential Advantage Fund with an AUM of Rs 48,769 crore
- Kotak Balanced Advantage Fund with an AUM of Rs 5,061 crore
- SBI Balanced Advantage Fund with assets of Rs 23,623 crore
(Disclaimer: The above information is provided for informational purposes only and should not be construed as investment advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions. Mutual fund investments are subject to market risks, and past performance is not indicative of future results.)
Balanced Advantage Funds, also known as Dynamic Asset Allocation Funds, are one of the seven categories of hybrid mutual funds that make unrestricted allocations to different asset classes, particularly equity and debt categories. As per SEBI guidelines, Dynamic Asset Allocation Funds invest in both equity and debt (up to 100% in equity and equity and debt categories). Unlike other hybrid funds, these schemes do not have a predetermined asset class allocation ratio. Fund managers are completely free to change this allocation from time to time based on changing market conditions. If stocks are available at lower valuations and the scheme has a higher allocation to gold and other fixed income instruments, the fund manager can sell some debt assets and invest the proceeds in equity assets.
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Invest in Balanced Deposit Funds?
Firstly, they are very unstable. Also, it is not based on a predetermined ratio. This makes the investment of these funds very good. Second, they offer the best of both categories. The allocation will change as market conditions change. Thirdly, if the risk is high and prefers active mutual funds rather than passive schemes like index funds, these funds can be chosen.
These funds can be chosen to achieve long-term financial goals and not in a hurry to achieve any particular goal. The Balanced Advance Funds category had total assets under management (AUM) of Rs 2,11,100 crore as on 31 July. There are currently 29 schemes under this category. As a mutual fund category, it has returned an average of 13.19 percent in the last 3 years and 9.18 percent in the last five years.
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HDFC Balanced Advantage Fund has assets of Rs 60,880 crore. ICICI Prudential Advantage Fund has an AUM of Rs 48,769 crore, Kotak Balanced Advantage Fund has an AUM of Rs 5,061 crore and SBI Balanced Advantage Fund has assets of Rs 23,623 crore. These are the best Balanced Advantage funds available in the market right now.
(Disclaimer: The above is not investment advice of any kind, it is merely information provided for the information of the investors. The information provided here is as available at this time. Mutual fund investments are subject to the possibility of profit and loss. Investors should always invest at their own risk)
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