Balance risk and return via balanced advantage funds

The heightened volatility seen so far in 2022 underscores the importance of taking prudent investment decisions, to both protect earlier gains and generate profit amid the prevailing market conditions using appropriate strategies.

One such preferred pathway is dynamic asset allocation, which helps balance the risks — while investment in equity funds can provide high returns with high risk, investment in debt funds could give relatively low returns with low risk — and generate returns to help achieve your investment goals.

Investing directly and rebalancing based on market movements is difficult for most retail investors. That’s where balanced advantage funds can help — by allocating resources dynamically based on existing market conditions.

Why invest in balanced advantage funds?

These are all-season funds, considering their dynamic asset allocation strategy, which involves allocating money to equity and debt instruments as per prevalent market conditions. More weightage for allocation is given to debt instruments when the equity valuations are higher, and vice versa.

Higher investor adoption

Investors’ preference for balanced advantage funds has increased, reflected by the fund’s assets under management (AUM) worth Rs 1.95 lakh crore as of October 2022, the highest AUM in the hybrid fund category. The fund’s AUM grew nearly 102% on an absolute basis in the three years through October 20221. Source: Association of Mutual Funds in India (AMFI)

Summary

The features of asset diversification, coupled with balancing risk and return, make balanced advantage fund a sound investment option for all market conditions. These funds reduce downside risks during the bear market phase, and at the same time, capture the upside during the bullish phase. Investors can also opt for systematic investment plans (SIPs) to invest regularly, which further lowers the risk involved in timing the markets. Nevertheless, prior to investing, investors must assess their own risk profile, investment horizon, and financial goals.

Disclaimer:

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.