Definition
Balanced Advantage Fund
A balanced advantage or dynamic asset allocation fund automatically shifts between equity and debt based on market valuations, aiming to buy low and sell high.
These funds use a model, often based on the P/E or price-to-book ratio, to raise equity exposure when markets are cheap and trim it when they are expensive. Many maintain enough net equity (often via derivatives) to qualify for equity taxation.
The goal is to reduce the emotional timing decisions investors struggle with, smoothing the ride during volatile markets. They suit moderate investors who want equity participation with a built-in cushion against sharp falls.
Related terms
- Asset AllocationAsset allocation is the decision of how to divide your portfolio among major asset classes — such as equity, debt, gold and cash — based on your goals, horizon and risk tolerance.
- Equity Savings FundAn equity savings fund blends equity, arbitrage and debt so that it holds enough total equity to qualify for equity taxation while hedging much of it to keep volatility low.
- Aggressive Hybrid FundAn aggressive hybrid fund holds 65-80% in equities and 20-35% in debt, offering an equity-tilted balanced portfolio in a single product.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.