Are you exploring the world of mutual funds for making a new investment? You may be surprised to see the variety in the types of funds available and recognise that sometimes it is difficult to spot the differences between various types of funds especially when they are similarly named. This is very true in the case of Balanced Advantage Mutual Funds and Balanced Mutual Funds.
Typically a Balanced Advantage Fund has the ability to dynamically shift between equity and debt depending on market conditions. In the case of these funds, when the markets are high and have reached peaks, they shed exposure to equity and move funds into debt, so even if the markets decline, the gains that the funds have made stay intact. This category of funds was introduced during fund recategorization by Securities and Exchange Board of India (SEBI) in October 2017. These funds usually use their own in-house strategies to decide when the fund will shift from one asset class to another.
A Balanced Advantage Fund primarily adjusts equity exposure on the basis of overall market valuations (expensive or cheap), whereas in the case of Balanced Mutual Funds, there is a pre-decided ratio of equity and debt investments. As an example, aggressive balanced funds keep 65-80 per cent of their investments in equities and the rest in debt. Here are some main differences between a Balanced Advantage Fund and a Balanced Fund.
Balanced advantage funds offer some benefits over the traditional balanced mutual funds. Here are some of them:
A Balanced Advantage Fund and a Balanced Mutual Fund are both classed as equity funds for the purposes of taxation and enjoy similar advantageous position as far as capital gains taxes are concerned. However, Balanced Advantage Mutual Funds outshine Balanced Funds because they are able to perform in any market conditions and provide reasonable returns to risk-shy investors.
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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME-RELATED DOCUMENTS CAREFULLY
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.