Ways to manage valuation risk

Balanced advantage funds can lower risk by paring equity exposure 

- SAIKAT NEOGI

AS FROTHY VALUATIONS of many stocks have corrected, fund managers are increasing equity exposure in balanced advantage funds, especially in high-quality companies at reasonable prices. This indicates fund managers' confidence in the market's growth prospects and the potential for higher returns.

Investing in balanced advantage funds can be rewarding for long-term investors as fund managers adjust the equity allocations to capitalise on attractive investment opportunities while maintaining a balance between risk and reward. These hybrid mutual fund schemes should be looked at as a part of asset allocation and in the long term, these funds would give better returns than fixed deposits and bonds. Moreover, these funds enjoy equity taxation benefits if their average equity exposure is 65% or more.

Anil Rego, founder, Right Horizons PMS, says, considering the current market trends, balanced advantage funds are better performing than equity funds. "From the moderate risk profile perspective, balanced advantage funds are highly advisable with the expectation of 810% returns."