Why to invest in a Balanced Advantage Fund?

Why to invest in a Balanced Advantage FundWhy to invest in a Balanced Advantage Fund?

Balanced Advantage Fund in India also called as Dynamic Asset Allocation fund is a hybrid mutual funds in India. For these funds, the fund managers are free to maintain and manage the exposure of funds to instruments of debt and equity without any minimized exposure limits or caps from the SEBI. These funds are capable of changing their level of exposure to debt instruments and equity according to the equity variations that are dynamic in nature. They can manage the exposures with the support and guidance of the in-house models of proprietary. These strategic models also help in eliminating human biases while making investment decisions. In this article we would provide why an investor need to invest in Balanced Advantage funds or Dynamic Asset Allocation Mutual Funds?

Also Read: Top Performing Balanced Funds to invest

Reasons to invest in Balanced Advantage Funds / Dynamic Asset Allocation Mutual Funds

Here are some major reasons why investment in a balanced advantage mutual fund in India is advantageous

1) The Dynamic asset allocation facility or balanced advantage mutual fund in India aims at delivering long-term returns with a reduced level of volatility in comparison to the equity funds.

2) It combines the key features of potential capital preservation, volatility control, and capital appreciation.

3) It aims at generating capital gains mainly through well-managed equity allocation according to the changing market conditions.

4) It aims to provide regular income and stability for getting exposed to instruments of fixed income.

5) Like hybrid funds in India, these funds also focuses on rebalancing portfolio decisions according to the time-tested and well-defined models without being bias.

6) It gives higher tax efficiency compare to asset allocation as implemented by the investor.

Who should invest in Balanced Advantage Funds?

1) Investors who are looking for long-term returns with lower volatility can invest in Balanced Advantage Funds.

2) Those who are seeking exposure to debt assets and equity classes along with great asset allocation.

3) Investors who are willing to participate with a conservative approach in equity markets.

4) The intermediate investors are seeking an automated solution during a volatile market or over-valued solutions.

5) The fresh investors are looking to get exposure in the equity market with reduced volatility.

6) The experienced investors are looking for an automated allocation of assets from the fund managers in terms of best hybrid funds in India.

7) People who have invested in a mix of debt, arbitrage, and equity have performed better than those who invested fully in equity mutual funds. The Balanced advantage funds in India or dynamic asset allocation facility are Mutual funds in India that widen the gap between aggressive hybrid and equity savings.

How Balanced Mutual Funds are taxed?

Here  is the taxation done on returns from balanced mutual funds

1) < 12 months – Short Term Capital Gains (STCG) – 15%

2) >=12 months – Long Term Capital Gains (LTCG) – 15%. LTCG is exempted up to Rs 1 Lakhs. Beyond Rs 1 Lakhs, the applicable tax is 10% without indexation.

Various ways on how a Balanced Advantage Fund in India helps

Short Term (1.5 to 3 years) – The balanced advantage funds or dynamic asset allocation facility is way more aggressive and potentially gives higher returns compared to equity savings funds. It is a better alternative for aggressive investors who are looking for higher returns in a time-frame of 1.5 to 3 years. Moderate risk-takers and conservative investors should choose to stick to pure debt funds and equity savings.

Medium Term (3 to 5 years) – Balanced advantage funds in India can adapt portfolios and do not fall in hybrid aggressive funds. The hybrid aggressive category has faded over the years because of its inconsistency in performance. Their portfolio strategies like shifting to mid-caps for high returns. This strategy requires more than 3 years working out. The Balanced advantage funds have replaced the hybrid aggressive category.

Also Read: Best Balanced Advantage Mutual Funds to invest in India

Very long-term (> 5 years) – The Balanced advantage funds work well to maintain the gap and lower the debt allocations. It also helps to reduce the volatility of the portfolio and impressively plays the role of debt. Therefore, in favor of the funds, you can partially lower the debt exposure. You must ensure not to completely replace the allocation of debt. You can use the Balanced Advantage funds with the debt funds.

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Suresh KP


  1. Your article has come at the right time as I was looking into the Balanced Advantage Funds. 🙂
    I would request you to add one section on taxation of the same. Would it be taxed as a equity fund or as a debt fund?
    Also, let me know whether they are good for lumpsum investments? If not, which fund would you recommend for lumpsum? I want to invest around 5 Lakhs for a period of 3-5 years or so, can be extended if required later on.
    Thank you.

    1. Hello Rajagopal, Thank you. I have added taxation section now. If you think these funds would fit it with your risk appetite, you can invest them through SIP. For lumpsum, you can scatter them into 3-4 installments if not more.

  2. Thank you for the well written post will all the reasons to invest in BAFs. Would highly appreciate if you suggest a list of good BAFs. Thanks again.

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