Best Balanced Advantage Funds - Dynamic Asset Allocation SIP in 2023 (2024)

FAQs

Are balanced advantage fund and dynamic asset allocation fund the same? ›

What is Dynamic Asset Allocation Mutual Fund. Balance Advantage Funds invest in a mix of stocks and FD-like instruments. However, they keep changing this allocation based on the market conditions to provide you optimal returns with minimal risk. Balance Advantage Funds also known as Dynamic Asset Allocation Funds.

Major advantages of dynamic asset allocation funds

This saves the investors from the hassle of timing the market and monitoring the portfolio performance. Tax efficiency: These funds are usually tax-efficient as they maintain a gross equity exposure of more than 65%, which makes them eligible for equity taxation.

Yes, it's a simple SWP. Yes, a 6% withdrawal rate is reasonable. Yes, a balanced advantage fund will reduce equity exposure when markets are expensive and use derivatives to reduce equity risk. Yes, a balanced advantage fund will deliver more than a debt fund, especially at these times.

However, they also have some risks such as market risk, model risk, and fund manager risk. Therefore, you should invest in balanced advantage funds only if you understand their working and are comfortable with their risk-return trade-off.

These funds have been able to contain the downside using different strategies and have given decent returns with much less volatility. Therefore, if you are looking for a long-term investment with lower volatility than that in a pure equity fund, you can consider balanced advantage funds.

Many mutual fund advisors have been recommending balanced advantage funds to new and inexperienced investors for a while now. These advisors believe that these schemes are ideally placed to take care of the current market conditions because of their dynamic portfolio.

Investing in these funds can be done via lumpsum as well as via Systematic Investment Plan (SIP). Investment via lumpsum mode provides higher returns as compared to SIP. This is because lumpsum gives more time for investment and thus the money grows faster because of the power of compounding.

Transaction costs

The frequent rebalancing the weights within the portfolio is associated with transaction costs. However, the constant buy and sell transactions diminish the overall returns of the portfolio.

What is the most successful asset allocation? ›

If you are a moderate-risk investor, it's best to start with a 60-30-10 or 70-20-10 allocation. Those of you who have a 60-40 allocation can also add a touch of gold to their portfolios for better diversification. If you are conservative, then 50-40-10 or 50-30-20 is a good way to start off on your investment journey.

Multi asset allocation funds provide relative stability and moderate risk through diversification across different asset classes. Dynamic asset funds offer the potential for higher returns by actively adjusting the investment mix based on market conditions.

Mutual fund advisors typically recommend aggressive hybrid fund schemes to 'conservative' equity investors to create wealth to achieve their long-term financial goals. Invest in balanced advantage funds only if you can tolerate the risk of investing in stocks.

The balanced funding option is highly recommended for those who are looking for assured returns after the end of their tenure. It is also a valuable asset to those who have limited funds to invest in multiple sectors. Above all, dynamic asset allocation Mutual Funds are preferred for their steady and recurring returns.

A balanced investment strategy combines asset classes in a portfolio in an attempt to balance risk and return. An asset allocation fund is a fund that provides investors with a diversified portfolio of investments across various asset classes.

BAFs dynamically allocate based on market conditions; AHFs invest up to 75% in equity and leverage arbitrage gains. JM Aggressive Hybrid Fund had a 54.21% return in a year; HDFC Balanced Advantage Fund, 40.87%. BAFs suit risk-tolerant investors; AHFs, conservative ones seeking moderate risk management.

Taxability on Dynamic Asset Allocation Funds

These are taxed at the rate of 10% for long-term capital gains (LTCG), held for more than 1 year, on profits made above Rs. 1 Lakh each year. For STCG, held for less than 1 year, these are taxed at the rate of 15%.

Approach to asset allocation: Multi-asset allocation funds seek to maintain allocation to different asset classes within a specified range. Balanced advantage funds dynamically adjust their allocation based on market conditions from time to time.