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

For some time now, many mutual fund advisors have been recommending balanced advantage funds to new and inexperienced investors. These advisors believe that these schemes are ideally positioned to cope with the current market conditions due to their dynamic portfolio. Advisors also recommend these schemes to investors for depositing 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 equity when the market is very high or valuations are high. They invest more in equity when stocks are available at attractive valuations. In short, balanced advantage funds do the job of juggling equity exposure for investors.

Of course, these funds limit equity exposure based on valuations, but that doesn’t make them entirely safe. Don’t be under any illusions that balanced advantage funds are a safe investment. In fact, many mutual fund distributors make such claims. However, don’t get swayed by such talk. Any mutual fund scheme that invests in stocks cannot be considered safe. It also cannot totally avoid volatility and losses. Therefore, invest in balanced advantage funds 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 you need to keep in mind while investing in such schemes? Yes, you need to make sure that the scheme is doing what it claims to do. Make sure that the scheme is rebalancing the portfolio in a timely manner. For example, there are schemes that invest heavily in stocks even when the market is at a higher level or at expensive valuations. You need to make sure that you do not participate in such schemes.

If you are thinking of investing in balanced advantage schemes, here are the recommended schemes you can consider investing in. There is no change in the list this month. Follow our monthly updates to know how your schemes performed in the previous month.

The best balanced equity funds to invest in September 2024:

ETMutualFunds.com has used the following parameters to select the hybrid mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.

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

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

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

3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
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) Patrimonial portion: It is measured by Jensen’s Alpha for the past 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 outperformed the returns predicted by the market.

Average returns generated by the MF Plan =

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

ii) Debt portion: Fund performance: benchmark performance. Daily cumulative returns are used to calculate the fund and benchmark performance and subsequently the fund’s active performance.

5. Asset size: For hybrid funds, the asset size limit is Rs 50 crore.

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