Nov 25, 2022
Reading Time: Approx. 15 min
Listen to 3 Best Balanced Advantage Funds or Dynamic Asset Allocation Funds to Invest in 2023
Just as the hybrid work culture has become a new-normal post-pandemic, hybrid funds such as Balanced Advantage Funds (also known as Dynamic Asset Allocation Funds), are getting the attention of late.
What are Balanced Advantage Funds or Dynamic Asset Allocation Funds and where do they invest?
As the name suggests, Balanced Advantage Fund/Dynamic Asset Allocation Funds have the investment mandate to manage their assets dynamically between equities and debt instruments, (depending on the market conditions and opportunities and threats playing out for the respective asset class); there is no fixed range for asset allocation. In other words, the allocation could swing between equity and debt contingent on the outlook for the respective asset classes.
That said, going by experience, most Balanced Advantage Funds usually tend to maintain a minimum 65% exposure to equities to enjoy the favourable tax status (of an equity-oriented fund) — except in circumstances when the equity market is at a lifetime high and the fund manager believes valuations look a bit stretched.
Besides, Balanced Advantage Funds/Dynamic Asset Allocation Funds may invest a small portion in Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs). For hedging purposes and to take advantage of arbitrage opportunities, at times such funds may also invest in derivatives.
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