BAF hai to jeet hai !!

There are many things that you want to try but are too afraid to take the leap. It could be bungee jumping, paragliding or even long distance running. It's something that you want to do but fear holds you back. Now, what if we were to tell you that there is a safety net. Something that can help you experience the thrill of any of the above things while ensuring that the risk associated with them gets reduced significantly. Would you then feel beer about taking the plunge? Most likely yes.

Just as in life you have to make multiple choices, in investing as well you have to make good decisions. Generally, if you want to build a robust long-term portfolio then inevitably, equities need to be a part of this portfolio. However, you might be one among many of the people who are afraid to invest in equities given their high risk nature. An ideal solution for you could be balanced advantage funds or BAFs.

The three things you need to know about BAFs

One of the best mutual funds to invest in, balanced advantage funds invest in a mix of equity and debt instruments and dynamically shi exposure between the two based on market conditions and opportunities. Here are the three things that you need to know about BAFs.

1. Classified as equity funds, BAFs invest 30-80% of their corpus in equies, while the remainder is parked in debt securities.

2. The proportion of equity and debt is based on market valuations and outlook, meaning that when the market is falling the fund manager reduces equity exposure and increases debt exposure and when the markets are moving up, the fund manager increases equity exposure and reduces debt exposure.

3. This ensures that you can benefit from the long-term growth potential of equities while protecting your portfolio downside through debt investments.

Why choose BAFs?

The benefits of BAFs are somewhat obvious from their definition itself. However, lets highlight them in detail below:

• The first reason is dynamic asset allocation which allows balanced advantage funds to allocate anywhere between 30-80% in equity, thus ensuring optimal returns, especially over the long term.

• Further, the ability to reduce exposure during equity market falls offers you potentially stable growth even during market lows. Through dynamic asset allocation these funds are able to quickly change equity allocations in response to the changing market environment. As a result, your investment portfolio would potentially grow in upward trending markets and stay protected in weak or downward trending markets.

• There is no need for you to try and me the markets since allocations are done dynamically based on pre-determined investment criteria.

• With acve management and a dynamic system in place, balanced advantage funds help to support multiple investment strategies while enabling you to benefit from a full market cycle.

• It helps you overcome your behavioral biases while dealing with equity markets. The boom line is that it ensures that you do not need to worry about the sharp movements in equity prices.