Imagine navigating the stock market like sailing a ship through choppy waters – you do not always know when the next wave will hit, but you are prepared with an automatic sail adjustment system that shifts based on the intensity of the waves. Balanced advantage funds (BAFs) work similarly. They adjust their sails—allocating more to equity when the markets are undervalued and pulling back into debt when the market overheats, ensuring smoother sailing. For investors, this strategy is like having a co-pilot who makes decisions based on data, not emotions, providing a sense of stability amid market turbulence
Balanced funds are hybrid mutual funds designed to take the complexity out of timing the market, making them an appealing option for investors who prefer a hands-off approach. Market volatility is inevitable, as seen with equity price swings driven by macroeconomic factors such as quarterly results, geopolitical events, and government policies. In such unpredictable environments, it is difficult for individual investors to determine the right time to buy or sell. The unique feature of BAFs is that they automatically shift between equity and debt, ensuring that investors participate in market rallies while minimizing losses during corrections. This dynamic allocation strategy offers a balanced approach to growth and risk management.
Who should invest in these schemes?
These funds are best suited for investors who want to mitigate the emotional pitfalls of investing while still seeking consistent growth. If you are someone who finds yourself often swayed by market news, political events, or economic uncertainty, a BAF can help smooth out your investment journey optimally, providing peace of mind while balancing risk and reward.
One such BAF that will help you navigate through market uncertainty is the ICICI Prudential Balanced Advantage Fund. With an AUM of over Rs.60,000 crore, the fund is one of the largest and oldest in this category. As of September 30, 2024 the fund delivered a strong return of 23.59% on a one year basis and CAGR returns of 13.75% and 14.37% on three year and five year basis respectively.