Investors of stock markets aiming to invest in mutual funds can invest in equity funds or debt funds. These instruments have their own pros and cons and are suitable for a diverse class of investors. However, there is also a hybrid mutual funds category that essentially aims to provide the best of both worlds to investors. These funds have the characteristics of both equity funds and debt funds as well as minimize the overall risk of investment for the investors as compared to investing in pure equity funds.
Among the hybrid funds, balanced advantage funds provide an edge to the investors on account of their dynamic nature. Given below are the meaning and other related details of balanced advantage funds.
Balanced advantage funds are also known as Dynamic Asset Allocation funds. These funds are hybrid mutual funds that invest in diverse asset classes like equity, debt, money market instruments, derivatives, real estate, etc. As per the recategorization of SEBI, hybrid mutual funds are classified into 7 types and dynamic asset allocation funds can shift dynamically between equity and debt proportion in the fund based on the prevailing market conditions.
There is no minimum amount of corpus that needs to be invested in equity or debt instruments as per the directions of SEBI. Fund managers can invest between 0% to 100% of the fund corpus between the equity and debt assets based on their strategic decisions to maximize the returns for the investors and achieve fund objectives.
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Hybrid funds are ideal for risk-averse investors who want to diversify their investments in equity and debt instruments. Balanced adjusted funds are active funds and require the fund managers’ expertise and experience in order to understand the market trends and rebalance the portfolio. Therefore, these funds belong to a moderately high-risk category of mutual funds and have the potential to generate more returns than passive funds. Hence, investors aiming for capital appreciation and a more or less stable source of income over a long-term investment horizon can opt for these funds.
This fund is an open-ended dynamic asset allocation fund and is ideal for investors aiming for wealth creation. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Dinesh Ahuja |
| Launch date | 31st August 2021 |
| Minimum investment | Rs. 5,000 |
| Expense ratio | 1.61 |
| Risk | Moderately High |
The returns provided by the fund as on 22nd August 2022 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 2.98% | – | – | – | 10.46% |
This fund is from the Kotak Mutual Fund and aims to follow the investment rule of ‘buy low and sell high’. The benchmark of the fund is the Nifty 50 Hybrid Composite Debt 50:50 Index. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Harish Krishnan |
| Launch date | 3rd August 2018 |
| Minimum investment | Rs. 1,000 |
| Expense ratio | 1.72 |
| Risk | Very High |
The returns provided by the fund as on 22nd August 2022 are tabled below.
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 3.40% | 5.46% | 12.19% | – | 10.19% |
This fund is from the ICICI Prudential Mutual Fund and belongs to the dynamic asset allocation mutual fund category. The benchmark of the fund CRISIL Hybrid 50+50 Moderate Index. The key details of the fund are,
| Particulars | Details |
| Fund manager | Mr. Sankaran Naren |
| Launch date | 30th December 2006 |
| Minimum investment | Rs. 500 |
| Expense ratio | 1.60 |
| Risk | Moderately High |
The returns provided by the fund as on 22nd August 2022 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 4.28% | 8.98% | 13.50% | 10.11% | 11.04% |
This is a hybrid mutual fund belonging to the balanced advantage fund category and having Nifty 50 Hybrid Composite Debt 50:50 Index. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Bhavesh Jain |
| Launch date | 20th August 2009 |
| Minimum investment | Rs. 5,000 |
| Expense ratio | 1.78 |
| Risk | Very High |
The returns provided by the fund as on 22nd August 2022 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 1.97% | 4.47% | 15.84% | 11.13% | 10.41% |
This is an open-ended hybrid fund that was launched in early 2000. The fund belongs to a high risk category and has CRISIL Hybrid 50+50 Moderate Index as iots benchmark. The key details of the fund are tabled below.
| Particulars | Details |
| Fund manager | Mr. Mohit Sharma |
| Launch date | 25th April 2000 |
| Minimum investment | Rs. 100 |
| Expense ratio | 1.81% |
| Risk | High |
The returns provided by the fund as on 22nd August 2022 are tabled below
| Period | 6 months | 1 yr | 3 yrs | 5 yrs | Since launch |
| Returns | 2.90% | 3.63% | 12.54% | 8.36% | 9.39% |
Some of the key pros and cons of balanced advantage funds are highlighted below.
Some of the key benefits that make balanced advantage funds an effective addition to a portfolio are mentioned hereunder.
Balanced advantage funds being hybrid funds, have the inherent benefit of investing in equity and debt instruments. Along with investments in equity and debt instruments, balanced advantage funds also invest in gold, real estate, money market instrument, etc. Therefore, investors have the benefit of having a diversified portfolio and the opportunity to gain returns from different categories of instruments.
Fund managers of a balanced advantage fund have the liberty to fluctuate between equity and debt instruments based on the market conditions. Therefore, investors do not have to actively readjust their portfolios depending on market fluctuations. Hence, it makes these funds an ideal investment option for new investors who have a higher risk appetite and a longer investment horizon along with limited knowledge to invest or create a portfolio on their own.
Most balanced advantage funds are taxed in line with equity funds. However, their ultimate taxation depends on the composition of the fund at the time of redemption of units. If the fund has dominant assets belonging to equity and equity instruments, the fund is STCG from the fund and is taxed at a flat rate of 15%. On the other hand, LTCG in such a case is taxed at a flat rate of 10% after the initial exemption of Rs.1,00,000. When the fund has debt and debt instruments as the dominant asset class, the fund will be taxed in line with debt funds. In such a case, the STCG from the fund will be taxed as per the applicable slab rate of the individual investor and LTCG will be taxed at a flat rate of 20% after the benefit of indexation.
The performance of these funds is highly dependent on the expertise and experience of fund managers. The ability of the fund managers to navigate the market trends and utilize these fluctuations to maximize the returns is the key to a successful portfolio. Investors can thus invest in these funds and can earn potentially higher returns.
The returns from balanced advantage funds are risk-adjusted that usually beat inflation. The risk of these funds is higher but the returns from these funds compensate for such risk and are higher than that in the case of debt funds and other traditional investment options.
Some of the challenges of investing in balanced advantage funds are,
The expense ratio of a mutual fund is associated with the cost of investing in these funds. The expense ratio of balanced advantage funds is usually higher than other mutual funds like balanced funds or debt funds. Such a higher expense ratio will eat into the returns from the fund and may not be as attractive for some investors.
If the fund manager is not competent enough, the performance of the fund will be affected. Also, if the policies and strategies of the fund manager are not in line with that of the investors’ expectations, the investors will not prefer such funds.
The investment horizon of these funds is usually 5 years or more. Therefore, these funds may not be ideal for investors with a short-term investment horizon or investors aiming to achieve short-term gains.
Balanced advantage funds are an excellent addition to a portfolio making it diversified as well as spreading the overall risk of investment. Seasoned investors having a moderately high risk appetite or novice investors looking for capital appreciation or long term goal based investing can opt for these funds to achieve create a portfolio that can adapt to the changing market scenario without putting in the extra efforts of rebalancing it on their own.
Balanced portfolio has more or less similar quantum of investment in equity and debt assets (fluctualting between maximum 40% to 60%). Balanced advantage funds do not have a minimum investment criteria in any particular asset class. The quantum of inevstmnt can be modified or altered based on the the fund manager’s assessment of the market fluctuations.
Yes. The expense ratio of balanced advantage funds is higher than balanced funds.
The ideal investment horizon of balanced advantage funds is approximately 5 years or more.
The key factors to consider while investing in balanced advantage funds are the risk and return profile of the fund, the investment horizon of the fund, the expense ratio of the fund, the fund manager experience and expertise, etc.
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