A balanced advantage mutual fund is a type of fund that uses the fluctuating stock market in its favour by using potent arbitrage tactics. The balanced advantage mutual fund aims at earning risk-adjusted returns through the constant adjustment of equity allocation.
Why balanced advantage mutual funds are favourable now?
The hike in crude oil prices, decrease in the value of rupee and political uncertainty has turned the stock market volatile. In this chaotic scenario, the financial experts suggests investing in the more dynamic or balanced advantage mutual funds to minimise the burden of risks involved in the investments. Investing in a balanced advantage mutual fund allows the investors to increase or decrease the allocation of their equities on the basis of the market valuation.
What are the main features and benefits of investing in a balanced advantage mutual fund?
The following are some of the features and benefits of investing in a balanced advantage mutual fund:
The fund enables the investor in the creation of wealth in the long run and at the same time; it also limits the volatility involved in the market valuation.
The dynamic scope of allocation of fixed income and equity through predefined formula enables the investors to flow more money in the bonds when the valuation goes up and lessen the flow when the valuation goes down.
The balanced advantage fund utilises the valuation metrics to analyse the market influence on the equities before allocating them.
The arbitrage tactic followed by this fund enables the investors to minimize the exposure of the heated market on the equity and still allows them to reap the benefit of tax by maintaining the allocation above 65%.
The fundamentals and technical parameters help the investors to identify the market trends, the investors use the knowledge to ride out the unstable market condition in the long run and achieve the goal of ‘Buy Low Sell High’.
The balanced advantage fund is flexible in nature; it enables the investors to make the most from the volatile situation of the market.
It is suitable for most investors who want to earn a steady and risk-adjusted return even when the market valuation is high and the returns are uncertain.
Is it suitable for everyone?
The balanced advantage mutual funds may have its share of benefits for the investors, but it is not designed for everyone. While the investors, who are new in the field of investments and are vulnerable to risks, may find security in the low volatility, the investors who have a better risk appetite may not be satisfied with the low returns. The balanced advantage funds adjust the components of the equity according to the market valuation, which deems it fit for the investors with low-risk tolerance.
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