Balanced advantage fund or balanced funds, where to invest?

In a volatile market, every investor is looking for good investment options to reap more and more returns. So post categorisation and reclassification of the MF schemes, SEBI has opened many doors for investment by introducing categories like balanced advantage fund.

But are these funds are made for you and what is the difference between the old balanced fund category and the balanced advantage fund category. Balanced advantage funds are dynamic asset allocation funds and balanced funds are hybrid funds. Balanced funds are hybrid funds which have predetermined asset allocation, whereas the dynamic asset allocation funds have the asset allocation which is dynamic that is equity and debt allocation are adjusted as per the market conditions.

With its flexibility, balanced advantage fund is able to make the most out of the market volatility. These funds use valuation matrices to adjust the asset allocation, that is, when equity markets are at peak, these funds reduce their equity exposure and enter the debt market by booking profits in equities and vice versa. So these funds are good for the shorter term horizon, but these funds fail to perform in the longer run, the primary reason behind this may be its aggressive rebalancing.

So investors can park money in these funds for a shorter period, say a year, but balanced funds which invest 65% of corpus in equities and remaining in debts suits long-term investors.