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Is investing in Balanced Advantage Funds a Good Retirement option?
Posted on Tuesday, September 27th, 2022 | By IndusInd Bank
Everybody works hard to live a comfortable life after retirement, but due to the rise in living costs simply relying on your savings may not be enough. Hence, you must plan and explore different investment options that can secure your future. Balanced Advantage Fund or BAF is one such investment option that can offer great returns provided it is used correctly. To know how BAF can be a good retirement option, you need to know what it is and understand its pros and cons.
What are Balanced Advantage Funds?
Balanced Advantage Funds are funds that invest in both equities and debt but do not have any restrictions on asset allocation. These funds can be allocated as per dynamic market fluctuations. When equity valuations are soaring, fund managers can level up their exposure to equities, and hold back when stock markets decline. Balanced Advantage Funds allow investors to make the most of a bull run without having to risk it all. They are meant for investors with a moderate capital appreciation. This type of investment can also work well for those near retirement and who have moderate risk tolerance.
Balanced Advantage Funds can be either equity-oriented or debt-oriented. In the former, about 60% of your funds would be invested in equities, and in the latter, 60% of your funds would be allocated to debts. The fund manager can also shuffle the allocation as per market volatility.
Benefits of investing in BAF
Investing in BAF can have some benefits, such as:
- Investing in BAF is a low-cost way to diversify your money without having to choose multiple stocks and bonds yourself.
- The fund manager researches and allocates the funds accordingly, hence, if you have a good fund manager you can make profits without doing much yourself.
- BAF is good for those who don’t have ample funds to make investments and also who may not have a lot of knowledge about investing.
- BAF allows systematic withdrawals while maintaining an appropriate asset allocation.
Defects of investing in BAF
Investing in BAF, however, can also have some defects if not monitored properly. They are:
- BAF fees may be a bit higher as a fund manager is automatically appointed to handle your finances and allocate funds on your behalf.
- While investing in BAF, you cannot choose the asset classes for fund distribution. The fund manager will make the choice.
In Conclusion
Your hard-earned money is your most valuable asset hence, it’s advisable that you thoroughly assess all investment options before putting your money anywhere. When it comes to investing in BAF, being able to trust your fund manager is very important. Hence, do your researches well before you make an investment decision. Visit here for investment and other wealth management consultation.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
