Mutual Funds: Bet on balanced advantage funds

Geo-political tensions, persistent high inflation and rising interest rates have increased market volatility and dampened investors’ confidence. As timing the entry into equity investments is an impossible task for retail investors, strategic asset allocation must be at the core of their portfolio.

Investors who would like to take less risk based on their risk appetite or life stage should consider hybrid funds such as balanced advantage funds now. In these funds, the fund managers work on the allocation across different asset classes based on their views on the stock market, interest rate and other relevant parameters. The equity allocation is in the 30-70% range depending on the market conditions. These funds are good for investors who want to take limited risk and generate overall returns between equity and debt.

More aggressive investors should prefer aggressive hybrid funds that are equity-oriented and would invest 70-80% of the assets in equity. These funds may not necessarily reduce the risk as most of the time they will have higher equity allocation. However, those investors who want to take marginally less risk compared to full equity exposure should invest in these funds. These funds are ideal for those who are looking for a more aggressive alternative to pure debt funds and want to invest in equity for higher return potential, while limiting their losses in case the markets fall.

Harshad Chetanwala, co-founder,, says those investors who have their asset allocation aligned with their financial goals should consider gradually adding equity funds in present market conditions to maintain their asset allocation. “As whenever the stock market corrects it reduces the equity allocation in the portfolio. The key is to remain focused on the asset allocation and invest the available surplus in equity to maintain the asset allocation,” he says.

Balanced advantage funds

Balanced advantage funds invest in a mix of stocks, debt and arbitrage opportunities, depending…

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