Best Balanced Advantage Funds or Dynamic Asset Allocation Funds to Invest in October 2024

Many mutual fund advisors have been recommending funds with balanced benefits to new and inexperienced investors for some time. These advisors believe that these schemes are ideally placed to address the current market conditions due to their dynamic portfolio. Advisors also recommend these plans to investors to set aside their lump sums.

Balanced advantage funds invest in a mix of equity, debt and arbitrage opportunities. These funds decide their equity exposure based on key market ratios or internal parameters. They invest less in stocks when the market is very high or valuations are at the limit. They invest more in stocks when stocks are available at attractive valuations. In short, BAFs do the job of juggling equity exposure for investors.

Sure, these funds limit exposure to stocks based on valuations, but that doesn’t make them completely safe. Don’t be under any illusion that balanced advantage funds are a safe investment. In fact, many mutual fund distributors make such claims. However, do not be influenced by such conversations. Any mutual fund scheme that invests in stocks cannot be considered safe. Nor can you totally avoid volatility and losses. Therefore, invest in funds with balanced benefits only if you can tolerate the risk of investing in stocks. Also, invest only if you have an investment horizon of at least five years.

Is there anything else I should keep in mind when investing in these plans? Yes, you need to make sure the plan does what it says it does. Make sure the plan is rebalancing the portfolio in a timely manner. For example, there are plans that invest heavily in stocks even when the market is at a higher level or at expensive valuations. You have to make sure you don’t fall into such schemes.

If you are planning to invest in balanced advantage schemes, these are our recommended schemes that you can consider investing in. There are no changes to the list this month. Follow our monthly updates to find out how your schemes performed in the previous month.

Better Balanced Bonus Funds invest in October 2024:

ETMutualFunds.com has employed the following parameters to shortlist the hybrid mutual fund schemes.
1. Average rolling returns: Shot daily for the last three years.2. Consistency in the last three years: The Hurst exponent, H, is used to calculate the coherence of a background. The H exponent is a measure of the randomness of a fund’s NAV series. Funds with high H tend to exhibit low volatility compared to funds with low H.

i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.

ii) When H is less than 0.5, the series is said to be mean-reverting.

iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger the trend of the series.

3. Risk of falling: For this measure we have only considered the negative returns provided by the mutual fund system.
X = Returns below zero

Y = Sum of all squares of X

Z = Y/number of days needed to calculate the relationship

Downside Risk = Square Root of Z

4. Superior performance
i) Portion of equity: It is measured by Jensen’s Alpha over the last three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). A higher alpha indicates that the portfolio’s performance has exceeded the market’s expected returns.

Average return generated by the MF scheme =

[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[Tasalibrederiesgo+BetadelesquemaMF*{(Rendimientopromediodelíndice-Tasalibrederiesgo}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}

ii) Portion of debt: Fund performance: reference performance. Daily rolling returns are used to calculate the fund and benchmark performance and subsequently the fund’s active performance.

5. Size of assets: For hybrid funds, the threshold asset size is Rs 50 crore.

(Disclaimer: Past performance is no guarantee of future performance.)