By Dhaval Kapadia
I want to invest with a long-term growth objective for my two minor granddaughters. Please explain the benefits of balanced advantage funds.
-V D Bhog
Balanced advantage funds are a category of hybrid funds, following an asset-allocation approach with the flexibility to invest dynamically into equity and fixed-income based on the fund manager’s views across asset classes. Asset-allocation calls are taken by the fund manager at his/her sole discretion, relieving investors of the need to decide their asset allocation on their own. To lower drawdown risk during volatile or adverse market phases, such funds can also lower net equity position by hedging some of the long equity positions if they find equity markets to be richly valued.
They maintain a gross exposure of at least 65% to equities, to retain the favourable equity taxation. A few funds in this category manage their allocation in a tight range, while for some the allocation is managed dynamically with the equity allocation moving up or down sharply in response to the manager’s conviction on equity markets. Such sharp changes subject investors to the risk of the manager’s skills in reading the market accurately, and can impact actual asset allocation vis-à-vis his recommended one. To gain better control over asset allocation, you can go for pure-play equity and fixed-income funds based on your recommended asset allocation, as per your risk appetite.
I have been investing in equity SIP for the past five years. How much can I redeem from my investments and will there be any exit load now?
SIPs are a mode of investment facilitating periodic investments at regular intervals, enabling an investor to average the cost of his investments. SIP investments can be withdrawn anytime unless the units are under a lock-in period. Also bear in mind the exit load charge if redeemed within exit load period. Note that units procured under each SIP installment are subjected to a lock-in or exit-load period (if applicable) from the date of that installment. The redeemed proceeds would be subject to capital gains tax (short-term or long-term) depending on the holding period.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to fepersonalfinance