ICICI Prudential Mutual Fund has a mutual fund name Balanced Advantage Fund - can someone explain how is it different from balanced funds?Asked
Both balanced and balanced advantage funds are part of the balanced fund category of mutual funds. There is only a small difference in the investment strategy of a balanced and balanced advantage fund.
A standard balanced fund just has the objective of growth and stability by investing in a mix of equity and debt instruments whereas a balanced advantage fund takes advantage of the highly fluctuating stocks in the market and tries to benefit from these fluctuations using the arbitrage tactics.
Because of this added benefit in the advantage funds the risk gets decreased and also there is higher scope of returns. Also investors must keep in mind that advantage funds usually charge a slightly high expense ratio because these funds are more active than standard balanced funds.
Both the funds have dividend and growth option and have the options of investment via the lump sum and SIP route.
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Some of the other top performing balanced and advantage balanced funds are:
Both Balanced Funds and Balanced Advantage Funds, invest the money gather into mixture of debt and equity. These are diversified mutual funds having perfect balance between risk and returns on investment, and are most popular mutual funds these days.
These funds differ on the percentage of equity instrument in their respective portfolios. Balanced fund will maintain approx. 65% equity contribution while the Balanced Advantage Fund can fluctuate between 30% to 80% equity based on market conditions.
ICICI Prudential Balanced Fund belongs to Balanced Funds category, thereby invests around 65%–75% portfolio into direct equity and rest is in debt.
Whereas, ICICI Prudential Balanced Advantage fund is a dynamic asset allocation fund. It has mandate to reduce its equity exposure upto 30% based on market conditions. Currently, ICICI Prudential Balanced Advantage fund’s portfolio has exposure of only 43% equity, and remaining is in debt.
Because of dynamic asset allocation, the average returns of ICICI Prudential Balanced Advantage fund is in the range of 9–12%; whereas ICICI Prudential Balanced fund gives 12–15% returns. Thus, higher the risk, higher the return.