Mutual Funds: How SIP in Balanced Advantage Fund Creates and Protects Investor Wealth – Says Expert
The markets are a place of worry when times are uncertain. Markets are also a place where worries dissolve when times are good. So when an investor develops an investment strategy, they wonder if it will work. And when it does, one worries about whether they will be able to protect, save or invest the money earned on their investment strategy wisely. Then, again, there is a concern for correction. When the markets recover, as they have for the past eighteen months, investors start to think of a correction. But pulling out of the markets isn’t a solution – because it means that if stocks keep going up, you lose future returns. Niranjan Avasthi, Head of Product, Marketing and Digital Activities at Edelweiss Asset Management Limited (EAML), said: “To overcome this difficult situation, a systematic investment plan (SIP) in the Balanced Advantage (BAF) fund, also known as dynamic asset allocation fund, is a good investment solution. ”Here in this article, Niranjan Avasthi shares his knowledge to explain how SIP in Balanced Advantage Fund creates and protects investor wealth .
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SIP to BAF
Giving the basics of SIP in BAF, Niranjan Avasthi explains, “Regular investments through SIPs in equity mutual funds have worked for many investors. This not only offers the convenience of investing as you earn, but also reduces the risk of timing. When investors go for a SIP in BAF, they are effectively investing in a mix of stocks and bonds. The equity allocation is determined by a model based on several factors. A model that calls for more allocation to stocks when stocks go up has worked for investors in the past. This model also quickly reduces exposure to equities when equities are no longer in fashion – or trending down. Dynamic allocation works in two ways – it protects the downside and at the same time it helps to participate in the upside of the stock markets. “
Avasthi adds: “Balanced Advantage Fund (BAF) is working on this strategy. Investing in this program through a systematic investment plan (SIP) has rewarded investors in the past. It may not excite much, as the returns may seem less. But if you look at the numbers on the downside, you will get the strategy crux. You cut volatility by almost half. In addition, it performs well on the maximum draft setting. Maximum draft is the maximum loss a regime experiences from its previous peak or peak. is despite the fact that there has been some volatility in the markets. “
Benefits of BAF
Speaking about the positives of BAF, Avasthi says, “About a Balanced Advantage (BAF) fund, there are two distinct advantages. One is the benefit of focusing on stocks. provides better returns than broad markets. The second advantage is exposure to good quality bonds which ensures that there is little risk and unpleasant surprises are avoided. These factors further reduce volatility and improve BAF returns. If a BAF maintains a minimum 65% exposure to equities, it is taxed as an equity fund.
BAF: Less volatile; better yields
Further, Avasthi suggests, “Since this strategy ensures a relatively less volatile experience for investors, even risk averse investors looking to invest in stocks can start a SIP in this program. you can always invest it in a pass or through a systematic transfer plan (STP) for a short period in BAF. A SIP guarantees a disciplined approach to investing. The longer you stay invested, the more you will get better adjusted returns risk on your investments. Recent data from the Association of Mutual Funds of India (AMFI) shows that SIP contributions reached a record high of Rs 10,351.3 crore in September 2021 compared to Rs 9,923 crore. Rs in August 2021. This is the first time that the total value of SIP has exceeded Rs 10,000 crore. As of September 2021, nearly 26.8 lakhs of SIP accounts have been added, which is to again a record addition for the industry. This shows the growing preference for SIP when it comes to investing in stocks. “
Advising long-term investors MF SIP
“Against the background of these facts, long-term retail investors may consider doing a SIP in a BAF scheme. Besides reasonably good and stable returns, a SIP in BAF can also be viewed as a long-term investment. BAF scheme can be part of your core investment portfolio for long-term goals such as your child’s higher education or planning for your retirement, ”concludes Avasthi.
(Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making any financial decisions.)