Sensex has been on fire in the last 1 year, breaching the 60,000 mark recently! It took just eight months for the Sensex to cover the journey from 50,000 in January this year to scale to the mighty 60,000 mark.
This up-roar in the market has made investors nervous of investing at the current levels.
Best option to invest in the current environment with Sensex at all time high, and bank FD at 5% p.a., is - Balanced Advantage Funds (BAF). Click here to read the secret to investing in them
What are they (BAF)?
Balanced Advantage Funds (BAF) are hybrid mutual funds, that invest in both debt & equity, and the fund manager varies the levels of debt & equity based on market conditions.
That means, as the equity valuations get expensive, these funds would reduce allocation to equity and move into debt. Likewise, when the valuations turn cheap, they would increase allocations back to equity.
Below is a graph showing how allocation in equity has decreased whenever markets became expensive and vice-versa.
Lock-in Period?
There's no lock-in period, but it is recommended to stay invested for 3-5 years for the best results.
Return Expectation?
In the current scenario, when FD rates are at 5% p.a., investors can easily expect a return between 7-10% p.a.
Risk?
As can be seen in the below graph, when the fund is held for 5 years, there has been ZERO instance when the investor has lost capital.
Below is an example of one of the Balanced Advantage Funds and the graph shows the returns generated if an investor would have invested on any date in the last 10 years and stayed invested for 5 years
Summarising the risk -
0% times - Capital Lost
Average Returns (in the past) - Around 11% p.a.
Best-case Scenario - 17% p.a. (so investors have the possibility of participating in case the stock market rallies)
Taxation
Applicable only on redemption. If redeemed after 1 year, the gain is taxed at 10%; while before that, tax applicable is 15% on gains made,
What are the other investors doing?
Balanced advantage funds have seen their assets jump from ₹83,433 crore in April 2020 to Rs. 1.26 trillion at the end of August 2021.
Secret Sauce to Investing in BAF?
There are over 27 Balanced Advantage Funds available in India issued by different financial institutions like HDFC, SBI, ICICI, Kotak, L&T, etc.. The key here is fund selection.
In the last 1 year, while an average fund gave a mediocre return of 28%, the best fund gave a whopping 60% return!
Thoroughly studying the fund manager's investing methodology and the valuation model they follow to alter asset allocation is very important when you're in BAF.
Please Note: This year's top-performing funds aren't necessarily going to be next year's best performers. It's not uncommon for a fund to have better-than-average performance one year and mediocre or below-average performance the following year.
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If we can help you invest, reach us on -
Email - arpita@NiveshMitr.com
Whatsapp - +91-91110-06340
Schedule a call with us - https://calendly.com/nivesh-mitr/niveshmitr
Minimum Investment Portfolio - Rs. 10 Lakhs
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully. The past performance of the mutual funds is not necessarily indicative of the future performance of the schemes
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