To experience the benefits of a combination of debt and equity bonds, balanced advantage funds—also known as dynamic asset allocation funds—can also be looked at. This category of funds has been gaining momentum.
Belonging to the category of hybrid mutual fund schemes, balanced advantage funds use an asset allocation strategy that switches between equities and debt bonds depending on the volatility of the equity market. A decent inflation-adjusted long-term return can be expected from such funds, which remains more than a debt or balanced fund.
Balanced advantage funds are known to adopt various valuation indicators, including profit-to-equity (P/E) and profit-to-book (P/B) ratios, to deploy assets. A few fund managers also deploy multi-factor models, and some balanced advantage funds may use pro-cyclical dynamic asset allocation models. Pro-cyclical funds spike their equity allocation during the bull-run in markets and reduce it at the time of bear markets.
An investor in balanced advantage funds can look forward to stable returns as the fund managers adopt a trend-based asset allocation model to maximise or minimise exposure to equities and debt depending on the market volatility.
Ideally, balanced advantage funds needn’t be a tactical allocation alone. Such funds could be added to the core portfolio by an aggressive or conservative investor, a retired individual, or a beginner in the equity market.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…
The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…
Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…
Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…
A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…
Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…