Balanced Advantage Funds Compare

Additional Useful Information

• An investor can buy “Units” of these mutual funds. These units can be purchased at a price which is called the “Net Asset Value or NAV”. The NAV of these funds keeps changing daily depending upon the changes in the stock prices of the companies that are held by them.

• The investor can sell these units anytime at the NAV price prevailing on the day of the sale.

• Total Purchase Amount	=	Number of Units X NAV as on the day of purchase
  Total Sale Amount	=	Number of Units X NAV as on the day of sale
  Total Gain	=	Total Sale Amount – Total Purchase Amount

• The fund house which issues a Balanced Advantage Mutual Fund may offer two options to select from –
• IDCW Option – In this option, growth in the mutual fund value is distributed back to the investor’s bank account in the form of periodic payouts called “Dividends”. This payout could be monthly or quarterly.
• Growth Option – In this option, growth in the mutual fund value is invested back in the fund for further growth. The investor’s gains are in the form of higher NAV price of the units of the fund.

• If an investor buys units in a Balanced Advantage Mutual Fund and sells them within a certain short period of time, then the fund house may charge the investor, certain nominal fees, at the time of the sale. These charges are the “Exit Load”. This period is typically less than 1 year but varies from fund to fund. Typical exit loads can vary from 0 to 1% of the sale amount.

• Balanced Advantage Mutual Funds are considered a good investment option for investors looking for capital appreciation as well as some regular income and safety.

Returns *

• Balanced Advantage Mutual Funds do not guarantee any returns. They are subject to market risks.

• If Balanced Advantage Mutual Funds are held over a long term, they could generate returns ranging from 13% to 19% per year.

Risk Level

• Balanced Advantage Mutual Funds are categorized as high-risk investments since they invest in the equity stock market.

• However, they are less risky as compared to equity mutual funds since they also carry some debt component.

Liquidity

• When an investor sells (or redeems) units of these funds, the fund house will pay the sale amount to the investor in 2 working days. (T+2)

Interesting Facts

• As per SEBI norms, if a mutual fund has an equity exposure of less than 65%, they are not considered as an equity focused Balanced Advantage fund. In this case, these mutual funds would be taxed as a typical debt mutual fund.

• However, if the equity exposure is more than 65%, it is considered as an equity focused mutual fund and is taxed just like a typical equity mutual fund.

• There is flexibility for rebalancing to make the most of market conditions. This means that if the equity markets become overvalued, the manager can remove some exposure out of equity into debt. However, the flexibility is limited since the allocations have to remain in the 40-60% range.

• Balanced Advantage Mutual Funds provide diversification benefits. This helps reduce the risk of investment.

Tax Implications

• A Balanced Advantage mutual fund can either fall below the 65% cut off or lie above the 65% cut off. This is important in deciding the taxation of the fund. If it falls below the cut off, it will be taxed as a debt fund. However, if it lies above the cut off, it will be taxed as an equity fund.

• When investors sell their Balanced Advantage Mutual Fund units, the difference between the Sale Amount and Purchase Amount is typically called “Capital Gain” or “Capital Loss” (if sale amount is lesser than the purchase amount).

• Debt Oriented Fund Taxation
• In the case of Capital Gain, this amount is to be added to the taxable income of the investor and taxes are required to be paid based on the applicable tax slab.

• Equity Oriented Fund Taxation - The tax that the investor must pay on Capital Gain is –
• Situation 1 – If the Balanced Advantage Mutual Funds are sold within a period of a year from investment, the Capital Gains earned (called Short Term Capital Gains) are taxed at 20% of the gain.
• Situation 2 - If the Balanced Advantage Mutual Funds are sold after a period of 1 year from investment, the Capital Gains earned (called Long Term Capital Gains) are taxed at 12.5% of the gain.

• There is no tax in case of “Capital Loss”.

• Any dividends/payouts received by investors from Balanced Advantage Mutual Funds are also to be added to their total taxable income and taxes are required to be paid as per the tax slab.

Where To Invest

• Balanced Advantage Funds - Invest in Best Balanced Advantage Mutual Funds 2023 (paytmmoney.com)

• Best Balanced Advantage Funds 2023: List of Best Balanced Advantage Funds to Invest in India (etmoney.com)