Should you opt for Balanced Advantage Funds? Find out

financialexpress.com:

The Covid period was full of uncertainty. At the start of the lockdown, nobody knew how the future would pan out. There was a constant flux of negative news which kept us worried. I’m sure many of you went through those moments of anxiety.

As things normalized, we all wanted to socialize, holiday with vengeance, and get back to work. As time passed, we kept the option of working from home or working from the office open. We noticed that some colleagues enjoyed the flexibility of hybrid models.

What is the relevance of this in the context of investing? We’ve seen the advantage of a hybrid work life. It allows us more time to pursue our passions and spend more time with family.

What do Hybrid Funds do? They invest in a mix of equity and debt. Within Hybrid Funds, there is a category called Balanced Advantage Funds. Balanced Advantage Funds tweak their asset allocation between equity and fixed income based on a formula. For instance, if valuations are stretched, the model will reduce equity exposure. On the other hand, if equity market valuations are attractive based on long-term averages, the model increases equity exposure.

Also Read: 10 things investors should check before investing in mutual funds

So it’s almost working against the typical human tendency of entering the market when equities are expensive and exiting when equities are at a discount. Balanced Advantage Funds try to achieve this automatically. They compute the levels of the market and compare it to long-term historic average based on the factor that they’re following, and they will adjust the fund’s equity and fixed income automatically without your intervention.

Remember that old advertisement for a popular bike with the slogan – fill it, shut it,