Contents
- What is Balanced Advantage Mutual Funds?
- Why invest in these funds?
- 8 Best Balanced Advantage Mutual Funds 2019
- 1. HDFC Balanced Advantage Fund
- 2. Reliance Balanced Advantage Fund
- 3. ICICI Prudential Balanced Advantage Fund
- 4. Aditya Birla Sun Life Balanced Advantage Fund
- 5. L&T Dynamic Equity Fund
- 6. Edelweiss Balanced Advantage Fund
- 7. Principal Balanced Advantage Fund
- 8. Invesco India Dynamic Equity Fund
- Difference between Balanced Funds and Balanced Advantage Funds
- Conclusion
Top balanced advantage funds are Mutual Funds that invest more than 65% of their assets in equities and the remaining assets in debt instruments to generate sufficient overall returns. The assets invested in equities and stocks give market-linked returns while the assets invested in debt instruments give fixed returns. Being a mixture of both Equity and Debt, investors should be very concerned when investing in these funds. The investors are recommended to look for the top Balanced Fund before investing in Balanced Advantage Mutual Funds.
What is Balanced Advantage Mutual Funds?
Recent SEBI norms dated April 2018 generated new categories and one of them is called dynamic Asset Allocation or balanced advantage fund (BAF). The norm states that funds in this category should have “investment in equity/debt”. AMCs have flexibility in handling these funds. The cause of confusion is that since funds in this category are termed “balanced advantage”, investors who are not so savvy associate these with balanced funds of earlier days.
Why invest in these funds?
One should get into dynamic asset allocation funds or BAFs to go with the fund manager’s proposals on the net equity exposure as per his reading of market valuations. To avoid confusion, don’t compare a BAF with the earlier balanced funds. Both the classes have their advantages, and both are eligible for equity-related taxation, but the difference is that aggressive hybrid funds have conventional equity exposure, while BAFs may have a lower net exposure to equity & might offer more stable returns on the risk they are taking. Balanced Mutual Funds are profitable for investors who are ready to take a market risk while looking for some fixed returns as well.
8 Best Balanced Advantage Mutual Funds 2019
| Fund Name | Net Asset Value (NAV) | 1Y Return | 3Y Return | 5Y Return |
|---|---|---|---|---|
| HDFC Balanced Advantage Fund Growth | ₹188.872 | 3.1 | 16.6 | 15.5 |
| Reliance Balanced Advantage Fund Growth | ₹92.154 | 7.7 | 10.5 | 9.7 |
| ICICI Prudential Balanced Advantage Fund Growth | ₹36.04 | 7.6 | 8.8 | 9.8 |
| Aditya Birla Sun Life Balanced Advantage Fund Growth | ₹53.41 | 6.7 | 8.5 | 9.2 |
| L&T Dynamic Equity Fund Growth | ₹24.408 | 3.3 | 6.8 | 8.2 |
| Edelweiss Balanced Advantage Fund Growth | ₹23.61 | 2.5 | 7.8 | 8.3 |
| Principal Balanced Advantage Fund Growth | ₹20.48 | 1.8 | 5.4 | 6.1 |
| Invesco India Dynamic Equity Fund Growth | ₹29.3 | 1.3 | 9.4 | 9.8 |
1. HDFC Balanced Advantage Fund
This fund intends to produce long term capital appreciation from a mutual fund portfolio that is invested predominantly in equity and equity-related instruments. This fund has the highest NAV.
2. Reliance Balanced Advantage Fund
The investment purpose of the Scheme is to gain returns by investing in equity or equity-related instruments essentially drawn from the Companies in the S&P BSE 200 Index. The Scheme may also invest in listed companies that are in the top 200 by market capitalization on the BSE. The Scheme may also invest in large IPO’s where the market capitalization of the Company making the IPO based on the Issue price would make such a company to be a part of the top 200 companies listed on the BSE based on the market capitalization.
The fund will have the flexibility to invest in a broad range of companies to maximize the returns, at the same time trying to minimize the risk by reasonable diversification. The selection of the companies will be done to capture the growth in the Indian economy. The fund will be focusing on companies with relatively higher market capitalization and having good liquidity in the stock market.
3. ICICI Prudential Balanced Advantage Fund
The objective is to seek low volatility returns by using arbitrage funds and other derivative strategies in equity markets and investments in the short-term debt portfolio. The fund invests in equity with the usage of derivatives.
4. Aditya Birla Sun Life Balanced Advantage Fund
The main objective of the Scheme is to generate long term growth of capital and income distribution with comparatively lower volatility by investing in a dynamically balanced portfolio of Equity & Equity-linked investments and fixed-income securities.
5. L&T Dynamic Equity Fund
The purpose of this fund is to create long-term capital appreciation from a diversified portfolio of equity and equity-related securities and to create generous returns by investing in a portfolio of debt and money market instruments and arbitrage possibilities in the cash and derivatives sections of the equity markets.
6. Edelweiss Balanced Advantage Fund
The basic objective of the scheme will be to create absolute returns with low volatility over a longer tenure of time. The scheme will invest in arbitrage opportunities, equity derivative strategies, pure equity investments and the balance in debt and money market instruments. The Scheme proposes to allocate assets to both equity and debt markets based upon the market view. Still, there is no certainty that the investment objective of the scheme will be achieved.
7. Principal Balanced Advantage Fund
The main aim of the scheme is to generate long term capital appreciation with moderately lower volatility through the systematic allocation of funds into equity, and in debt /money market instruments for protective purposes. The Scheme will decide on the allocation of funds into equity assets based on equity market Price Earning Ratio (PE Ratio) levels. When the markets become high in terms of ‘Price to Earnings’ Ratio, the Scheme will lessen its allocation to equities and move assets into debt and/or money market instruments and vice versa.
8. Invesco India Dynamic Equity Fund
The investment objective of this Equity Fund Scheme is to produce long-term capital growth from a portfolio of predominantly equity and equity-related securities.
Difference between Balanced Funds and Balanced Advantage Funds
- Both Balanced and Balanced Advantage Funds are components of the Balanced Fund category of mutual funds.
- There is simply a small difference in the investment strategy of a balanced and balanced advantage fund.
- A standard balanced fund only has the aim of growth and stability by investing in a mix of equity and debt funds whereas a balanced advantage fund gets the advantage of the extremely fluctuating stocks in the market and seeks to benefit from these fluctuations using the arbitrage tactics.
- Because of this added benefit in the advantage funds, the risk becomes decreased and also there is a larger scope of returns. Also, investors must keep in mind that advantage funds usually charge a lightly high expense ratio because these funds are more effective than standard balanced funds.
- Both the funds have dividend and growth choice and have benefits of the best investment option via the lump sum and SIP route.
Conclusion
These schemes dynamically handle the equity and debt part of the corpus-based on the market requirements. Fund houses follow their ratios and formulas to handle the investments dynamically. In theory, these schemes will determine their equity exposure based on the estimates in the market. That indicates when the market is very high or overvalued, they will have lower equity exposure. When the market is rightly-priced or undervalued, they will up their equity exposure. Investors opting for this category should understand the strategy of the specific fund house before choosing a fund as all fund houses are maintaining their dynamic asset allocation funds individually.
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