Many mutual fund advisors have been recommending balanced advantage funds to new and inexperienced investors, citing their suitability for the current market environment. Their dynamically managed portfolios allow these schemes to adjust equity and debt exposure based on market conditions. Advisors are also recommending them to investors looking to deploy lumpsum amounts.
Balanced advantage funds invest in a mix of stocks, debt, and arbitrage opportunities. These funds decide their equity exposure depending on key market ratios or in-house parameters. They invest less in stocks when the market is very high or valuations are stretched. They invest more in equity when stocks are available at attractive valuations. In short, BAFs do the job of juggling equity exposure for investors.
