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Balanced advanced funds have gained much popularity in recent times. One of the many reasons is its flexibility to rebalance its portfolio with changing market conditions. During a volatile market, equities become risker while debt funds can generate a stable return and regular income. Many investors want to invest in equities but also want to restrict their losses or take less risk. These investors can consider Balanced Advantage Funds. 

What are Balanced Advantage funds?

Balanced Advantage Funds are hybrid funds which mean they invest in equities as well as debt instruments. The fund manager allocates more assets into debt instruments when the markets are volatile, while during highly volatile markets reducing the risk factor and generating stable returns. 

How do Balanced Advantage Funds work?

Since balanced advantage funds can change asset allocation as per market conditions, the returns generated by these funds are more stable, and the investors incur less risk than equity funds.

Fund managers of these funds track the market continuously and change the asset allocation whenever they think it is necessary to reduce risk and generate better risk-adjusted returns. There are no restrictions on asset allocation in these funds like in equity funds. 

For example, Balanced advantage funds can have 50% of equity instruments and the remaining 50% in debt instruments, and it could even be 25% of equity and 75% of debt or vice versa. So, it completely depends on the market condition and how much funds will be allocated to which asset class. 

Taxation:
 

These funds are taxed as per their asset allocation. However, most funds have equity taxation with 65% or more allocation in equity. 
 

While everyone wants a well-diversified portfolio that would offer better risk-adjusted returns, achieving the perfect match is difficult. However, with balanced advantage funds, you can have a well-diversified portfolio as well as better returns at lower risk. 

Disclaimer: Investment in securities and other investment products is subject to market risks; read all the related terms and documents carefully before investing.