SEBI has defined 3 categories of mutual funds, namely equity, debt and hybrid mutual funds. Most investors know the basics of investing in equity and debt mutual funds, but when it comes to hybrid mutual funds like BAF, they are a bit clueless.
BAFs or Balanced Advantage Funds are the most popular type of hybrid mutual funds with Rs. 1.9 lakh crore being managed as of October 2022.
Hence, Money Assist, mutual fund agent, takes a look at the details of BAF or Balanced Advantage Funds.
Balanced Advantage Funds or BAF are a type of hybrid fund. Hybrid funds invest in both equity and debt instruments. The formal definition of this type of mutual funds was created in October 2017 by SEBI.
Dynamic Asset Allocation is at the core of BAF-type mutual funds. These funds have complete flexibility in shifting between the allocations in debt and equity. Obviously, this dynamism is based on the view of the markets.
The model of functioning of these funds is very simple. When equity valuations are low, fund managers increase equity exposure and lean towards debt when equity valuations are high. In this way, they dynamically increase the fund’s exposure to equity and debt.
So based on market sentiment, BAFs change their asset allocation. If you are keen to invest in BAFs and take advantage of the dynamism of investing, you can choose to invest through mutual fund agent, Money Assist.
Since this is a hybrid scheme, there is an exposure to equity and to debt mutual funds. When there is exposure to equity schemes, there is additional volatility associated with it, which is usually offset by the debt schemes.
So this is one of the best options for first-timers. Also, there is sufficient growth along with stability. The growth aspect comes from equity exposure while stability comes from the exposure to debt.
At the end of the day, no mutual fund agent can advise you to choose a fund, as they are just distributors. Hence, you can decide for yourself if you wish to invest in BAFs, given that their allocation depends on the funds’ internal model. So read the entire fund’s offer properly before taking any decision. Also, check the ratings of the bonds.
BAFs are a very interesting hybrid scheme in which you can invest. Given their popularity recently, they are very much in demand. Hence, to invest in any BAF scheme from the major mutual fund houses, take the help of mutual fund agent, Money Assist.
