Know Everything About A Balanced Advantage Fund

What are Balanced Advantage Funds?

• Balanced advantage funds are hybrid funds that invest in stocks and bonds. Balanced advantage funds have no constraints on the dedicated share and can flexibly modify their allocations. These are also called Dynamic Asset Allocation Funds, mainly because these funds can quickly adapt to the dynamic capital market. When equity values are high in these funds, the fund manager may modify the investment strategy towards debt, and when stock prices are low, the allocation may shift more towards stocks.

Benefits of Investing In Balanced Advantage Funds

• • Potential for Returns: The balanced advantage fund invests in debt and equity with a dynamic approach. As a result, investors benefit from debt investments to tackle equity volatility. This enables an increased potential for balanced advantage funds.
  • Dynamic Allocation: BAFs can substantially increase or reduce their allocation to debt and equity with the ability to allocate 0-100% to equity. This enables the balanced advantage funds to provide a more robust long-term mix of returns at lower volatility.
  • Risk: One significant benefit of balanced advantage funds is that they lower your risk of potential losses by balancing your investment exposure. When the equity market becomes highly volatile, you can choose to reduce your exposure by investing more in debt instruments.
  • Beginner Friendly: Balanced advantage funds have the potential to be investment vehicles for investors who may lack expertise in the equity market and are often conservative. As professionals manage these funds, investors need not worry about asset allocation.







• Tax Treatment of Balanced Advantage Funds

  The tax liability of a balanced advantage fund is determined based on the holding period of the investment:

  Your mutual fund holding period can either be short-term or long-term. The duration to define this is different for equity-oriented mutual funds and non-equity mutual funds. Once you know the type of your fund and its holding period, you can evaluate your tax liability accordingly

  If your holding period is more than a year, the returns are termed long-term capital gains. In this case, gains up to Rs 1 lakh in a financial year are tax-free, but anything above that is subject to a 10% tax rate. If your holding period is less than a year, the returns are termed short-term capital gains and are taxed at 15%.

• Who Should Invest in Balanced Advantage Fund?
  Before you make any investment decisions, make sure that they align with your financial goals, risk appetite and investment horizon. You may choose to invest in balanced advantage fund if you fall under the following categories: accordingly.
  • Investors looking for long term wealth creation.
  • Investors seeking diversification of investments in their portfolio.
  • Investors who are looking for product with lower volatility & relatively stable returns.
  • Investors who do not prefer buying stocks at extremely high valuations.

• Conclusion

  Equity markets are inherently volatile, with ups and downs as part of the cycle. This is one of the reasons why balanced advantage funds have gained popularity in recent years. You can now diversify market volatility with BAF. But, wondering where to start?
  Presenting LIC MF Balanced Advantage Fund - An Open Ended Dynamic Asset Allocation Fund. It invests in a dynamically managed portfolio of equity and equity-related instruments, debt and money market instruments. It may be your next investment choice if you are an investor looking for long-term wealth creation and portfolio diversification.