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The word ‘balance’ comes into our dictionary very early in life. When you are young then it is all about striking a balance between your studies and sports activities, when you enter your professional journey the focus shifts to balancing between spending and saving, and when you are a decade into your career, the balancing act is between your home and family commitments and your work. To achieve this balance, you do multiple things right from making a study timetable during your school day to earmarking designated no phone/ laptop hours in order to spend more time with your family.
The word ‘balance’ comes into our dictionary very early in life. When you are young then it is all about striking a balance between your studies and sports activities, when you enter your professional journey the focus shifts to balancing between spending and saving, and when you are a decade into your career, the balancing act is between your home and family commitments and your work. To achieve this balance, you do multiple things right from making a study timetable during your school day to earmarking designated no phone/ laptop hours in order to spend more time with your family.
However, have you ever stopped to think ki ‘balance kyun zaroori hai’?
However, have you ever stopped to think ki ‘balance kyun zaroori hai’?
The importance of striking a balance in your investment portfolio
The importance of striking a balance in your investment portfolio
There are two main purposes to creating an investment portfolio. One is to grow your investments and two is to protect your investments. Too much of growth can sometimes come at the cost of safety and too much of safety can limit portfolio growth. Hence, there is a need to balance portfolio growth with portfolio protection. From an investment perspective this would translate into balancing your equity and debt exposure. Generally, the equity component of your investment portfolio is expected to provide long-term growth while the debt component is expected to provide downside protection. This means that if there is too much equity in your portfolio then you might be taking more risk than you should and if there is too much debt in your portfolio then your investment portfolio might not generate sufficient returns that are required to achieve your financial goals. Thus, it becomes absolutely important to balance the debt and equity exposure in your portfolio.
There are two main purposes to creating an investment portfolio. One is to grow your investments and two is to protect your investments. Too much of growth can sometimes come at the cost of safety and too much of safety can limit portfolio growth. Hence, there is a need to balance portfolio growth with portfolio protection. From an investment perspective this would translate into balancing your equity and debt exposure. Generally, the equity component of your investment portfolio is expected to provide long-term growth while the debt component is expected to provide downside protection. This means that if there is too much equity in your portfolio then you might be taking more risk than you should and if there is too much debt in your portfolio then your investment portfolio might not generate sufficient returns that are required to achieve your financial goals. Thus, it becomes absolutely important to balance the debt and equity exposure in your portfolio.
However, this is easier said than done. How do you decide what is too much equity or too much debt? More importantly, how do you know when to switch exposure from equity to debt and vice-versa? This is where Balanced Advantage Funds (BAF) can really help you.
However, this is easier said than done. How do you decide what is too much equity or too much debt? More importantly, how do you know when to switch exposure from equity to debt and vice-versa? This is where Balanced Advantage Funds (BAF) can really help you.
The multiple ways by which Balanced Advantage Funds add value to your portfolio
The multiple ways by which Balanced Advantage Funds add value to your portfolio
A balanced advantage fund, is a type of a mutual fund investment that falls under the category of hybrid mutual funds. This means that these funds invest in a mix of equity, debt, and gold instruments to create a portfolio that can provide both growth as well as protection. The advantage of a balanced advantage fund lies in the way they manage the exposure between debt and equity instruments.
A balanced advantage fund, is a type of a mutual fund investment that falls under the category of hybrid mutual funds. This means that these funds invest in a mix of equity, debt, and gold instruments to create a portfolio that can provide both growth as well as protection. The advantage of a balanced advantage fund lies in the way they manage the exposure between debt and equity instruments.
It typically shifts exposure between equity and debt investments based on certain investment criteria that has been previously decided by the fund management team and depending on market conditions. When equity markets start going up, BAF can invest a higher amount in equities and take advantage of the growth opportunities that they offer. On the other hand, when equities start to fall, it can dynamically move a larger proportion of portfolio investments to debt instruments. This way, BAF can actively protect the portfolio from sharp movements in the equity market and limit losses.
It typically shifts exposure between equity and debt investments based on certain investment criteria that has been previously decided by the fund management team and depending on market conditions. When equity markets start going up, BAF can invest a higher amount in equities and take advantage of the growth opportunities that they offer. On the other hand, when equities start to fall, it can dynamically move a larger proportion of portfolio investments to debt instruments. This way, BAF can actively protect the portfolio from sharp movements in the equity market and limit losses.
As an investor in a BAF, you will be able to create a robust investment portfolio that can help you achieve your financial goals. Some of the direct benefits include:
As an investor in a BAF, you will be able to create a robust investment portfolio that can help you achieve your financial goals. Some of the direct benefits include:
• 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.
• 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 timing the market since allocations are done dynamically based on pre-determined investment criteria.
• There is no need for you to try timing the market since allocations are done dynamically based on pre-determined investment criteria.
• It helps you overcome your behavioral biases while dealing with equity markets. The bottom line is that it ensures that you do not need to worry about the sharp movements in equity prices.
• It helps you overcome your behavioral biases while dealing with equity markets. The bottom line is that it ensures that you do not need to worry about the sharp movements in equity prices.
While balancing toh zaroori hai, with BAF, doing the balancing act also becomes easy. Considering how important your investment portfolio is and the role that it plays in helping you achieve your financial goal, it is time that you explore balanced advantage funds.
While balancing toh zaroori hai, with BAF, doing the balancing act also becomes easy. Considering how important your investment portfolio is and the role that it plays in helping you achieve your financial goal, it is time that you explore balanced advantage funds.
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