Difference between Balanced Advantage Fund and a Balanced Fund

 

Explainer: Difference between Balanced Advantage Fund and a Balanced Fund

Out of the different types of mutual funds, 'Balanced Funds' and 'Balanced Advantage Funds' have their distinction. In this article, we are trying to explore the differences between these types of funds and make you understand more about the working of each category.

A Balanced Fund is also called a Hybrid Fund. These funds invest in two asset classes, primarily Equity & Debt. The asset allocation of the debt and equity is fixed. Based on the asset allocation, Hybrid or Balanced funds are further divided into two types.

 

  1. Aggressive Hybrid Funds

  2. Conservative Hybrid Funds

 

An Aggressive Hybrid Fund is a type of balanced fund where the portfolio's equity portion will be around the minimum level of 70% to 75%, and the debt portion will be around 25% to 30%. Thus, this makes the portfolio an aggressive Hybrid Fund.

A Conservative Hybrid Fund is a balanced fund where the debt portion in the portfolio will be around the minimum level of 70% to 75%, and the equity portion will be around 25% to 30%.

In contrast to Balanced Funds, a Balanced Advantage Fund has a portfolio that changes dynamically based on the market levels or valuations. Suppose the markets are trading at high valuations such as high P/E or high EV/EBITDA levels, then the equity allocation will be lower. The equity exposure will be higher when the markets are trading at low valuations. Thus, based on the market levels and economic outlook, the exposure to equities in the balanced advantage fund can vary anywhere between 30% to 80%.

Due to this dynamic asset allocation nature of Balanced Advantage Funds, they have the upper hand in handling both bullish and bearish phases of the market for growth and protection of the portfolio.

 

At ATS, we have tools to analyze and recommend funds to our clients based on different performance measures of the portfolio. For support in best fund suggestions and creating an investment plan and portfolio management services, please write to us at research@adityatrading.com

To read more posts from ATS, check our blog at https://adityatrading.in/mutual-funds/

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This report is only for the information of our customers. Recommendations, opinions, or suggestions are given with the understanding that readers acting on this information assume all risks involved. The information provided herein is not to be construed as an offer to buy or sell securities of any kind. ATS and/or its group companies do not as assume any responsibility or liability resulting from the use of such information.

 

 

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