A balanced advantage fund may offer investors an attractive way to navigate uncertain markets. While stock markets can experience sharp ups and downs, a balanced advantage fund aims to provide more stable returns over time through a mix of stocks, bonds and alternative investments.
A balanced advantage fund could provide an appealing solution for investors seeking solid returns but concerned about volatility.
What is a balanced advantage fund?
Balanced advantage funds provide broad market exposure while aiming to reduce volatility. They typically hold 60-70% of equities assets, while the rest are fixed-income securities and other stable value investments. They aim for less volatility and smaller drawdowns than a typical equity fund.
How can balanced advantage funds withstand market volatility?
Balanced advantage funds are hybrid funds that aim to provide growth and income while reducing volatility. These funds adjust their allocations based on market conditions to optimise risk-adjusted returns.
These funds allocate assets across multiple investment categories. They increase stock holdings when markets rise to generate higher returns. They shift to more stable bonds and alternative investments when markets decline to limit losses. This dynamic approach to asset allocation helps balanced advantage funds weather market ups and downs.
4 reasons to invest in balanced advantage funds
There are 4 key reasons why investors may want to consider balanced advantage funds:
Dynamic asset allocation for market resilience – Balanced advantage funds offer a unique advantage with their dynamic asset allocation strategy. In an evolving market landscape, these funds adapt to changing conditions by adjusting the proportion of equity and debt in their portfolios. This dynamic approach enhances the fund’s resilience, making it an appealing option for investors who navigate market volatility confidently.
Risk mitigation – Market volatility can disturb investors, but a balanced advantage fund’s growth protects against turbulence. By actively managing the risk through strategic asset allocation, these funds aim to minimise the impact of market fluctuations on the investment portfolio.
Tax efficiency – Balanced advantage funds often come with tax advantages that can enhance the overall returns. The strategic allocation between equity and debt allows for tax-efficient wealth accumulation, especially for long-term investors. The potential for tax liabilities adds a layer of attractiveness to these funds, making them a tool for wealth creation and smart tax planning.
Consistent returns with steady growth – Investors often seek consistency in returns to build wealth steadily over time. Balanced advantage funds aim to deliver stable and consistent returns with their balanced approach to asset allocation. The combination of equities and debt instruments helps smooth out the volatility typically associated with pure equity funds. This steady performance becomes a key factor for investors looking for reliable growth.
While no investment is immune to market fluctuations and downturns, a balanced advantage fund aims to provide stability through diversification and active management. For investors seeking long-term growth but concerned with short-term volatility, a balanced advantage fund could be an appealing choice.