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.