The popularity of balanced advantage funds has soared in the last few years. The biggest attraction for investors being that balanced advantage funds increase equity exposure when the valuations go down so that profits can be reaped when the markets go up. Similarly when markets go up, the equity exposure is reduced and the funds till tilt more towards debt. The rebalancing acts are performed on the basis of research backed data and quantitative models which reduces the room for errors brought about by emotional bias. Besides this, there are other advantages of investing in balanced advantage funds:

  • Owing to the way balanced advantage funds work, these can be worthwhile addition to your portfolio because it can beat market slumps because when a particular investment vehicle is underperforming, the weightage can be shifted to another vessel which is performing better. This also helps balance the risks and rewards profile.
  • In the long term investment game, diversification is sacrosanct for better returns and balanced advantage funds help you widely spread out your investments across different asset classes. It also offers the added advantage of maintaining adequate diversity in the portfolio of investors through a consolidated fund instead of having to channelize investments in multiple assets separately.
  • Since these funds invest in multiple asset classes, these funds offer better returns in the long term because any drastic effects triggered by market volatility is absorbed.
Taxation of balanced advantage funds

Balanced advantage funds are treated like equity mutual funds. For a fund to be treated as equity mutual fund for taxation purposes, the equity plus arbitrage has to be 65% or more. A short term capital gains tax of 15% is levied if the investment has been held for less than 12 months. For investments held for more than 12 months, long term capital gains tax of 10% is applicable for gains exceeding 1,00,000 INR.

Things to consider
  • While these funds have a debt component, they are not completely risk-free. The equity component in the balanced advantage funds makes them prone to market volatilities and their NAVs can fluctuate based on market conditions. They however carry lower risks than pure equities.
  • Balanced advantage funds generate less returns than pure equities, but they are a much better bet for capital appreciation compared to fixed income instruments. Also, these funds may not exhibit impressive performances in the short term because of equity holdings but they are suitable for investors with 3-5 years investment horizon.
Disclaimer: An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund

All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Centre section available on the website of Mirae Asset Mutual Fund

Mutual fund investments are subject to market risks, read all scheme related documents carefully.


IE Disclaimer

An investor education initiative by Mirae Asset Mutual Fund.

For information KYC process, Registered Mutual Funds and the procedure to lodge a complaint, refer knowledge centre section available on the website of Mirae Asset Mutal Fund.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.