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    Timing the market, BAF style

    Timing the market, BAF style

    Timing the market, BAF style
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    By CNBCTV18.com  IST (Updated)

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    In these uncertain times, there is nothing more critical for an investor than to handle market movements and protect their investments when the market falls.

    Balanced Advantage Funds or BAF are quite balanced. Literally. After all, there aren’t too many investment options in the market that let you have the cake and eat it too.
    BAFs, also known as Dynamic Asset Allocation Funds, are a category of Hybrid Mutual Fund Schemes -- as specified by SEBI -- that invest in asset classes like debt and equity. They keep modifying their asset allocation based on market movements.
    They are structured to increase investments in rising markets (bull) and protect in falling (bear) markets.
    GUIDING DEBT AND EQUITY ALLOCATION
    BAFs manage market ups and downs by dynamically guiding its debt and equity allocation. Like a good kabaddi raider, it devises a strategy to attack and generate returns when the game is moving his way and defends by limiting downside when the opposing team is on the offensive. In other words, BAFs are a sure-fire winner to master market volatility in the long run – in the most disciplined manner possible.
    BAF’s MANIFOLD ADVANTAGES
    The advantages of Balanced Advantage Funds are manifold, but nothing more critical for an investor than the fact that he or she can manage market volatility and aim to limit losses when the market falls. There are manifold reasons why investors are looking to BAF in these turbulent, pandemic-hit times. Consider the following:
    **These funds aim to deliver long-term returns closer to equity funds, but with lower risk
    **It aims to grow your money in rising markets and protect in falling markets
    ** Aims to generate capital gains primarily through dynamic management of equity allocation as per varying market conditions
    ** Intends to provide stability and regular income through exposure to fixed income instruments
    ** Portfolio rebalancing decisions are usually based on a well-defined and time-tested model, taking away emotional bias in investing
    ** Offers higher tax efficiency than asset allocation implemented by the investor himself
    BENEFITS FOR ALL LONG-TERM INVESTORS
    Unarguably, the most attractive facet about BAFs are the benefits it offers to all kinds of long-term investors – both the first-time mutual fund rookie investor wanting to make a splash into equity investments with lower risk or veterans of the investor market.
    These long-term investors could include investors on the lookout for a more aggressive alternative to pure Debt Funds or those wanting to invest in Equity for higher return potential, while cutting their losses in case the market falls.
    CUTTING DOWN ON RISKS
    For investors seeking to reduce risk, invest in a diversified portfolio and leave asset management to an expert, BAFs offer the best option.
    Of course, for first-time mutual fund investors looking for long term investment avenue for wealth creation, BAFs are tailor made.
    COMMON SENSE TIPS
    Some common-sense, market-wise tips are in order while selecting BAFs. Do not compare returns without looking at underlying portfolio allocations and two, expense rations can be a big differentiator between the direct and regular plans.
    Industry veterans – who have witnessed, and indeed scripted - financial markets since the days of the yore, watching the mutual fund industry take tentative baby steps back in the 1960s and 1970s – now believe the best way to make money is through asset allocation. And something that does automatic asset allocation without you doing something about it 24x7, is the best way to create long term wealth. Welcome to the world of Balanced Advantage Funds.
    A lot of awareness is needed around this category. To answer your queries and raise awareness around Balance Advantage Funds, we invite you to join our webinar on January 21, 2021 at 4 pm. Click here to register.
    This is a partnered post.
    Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
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