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All About Balanced Advantage Mutual Funds

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Created on
January 18, 2023


What’s Inside

Looking for the best balanced advantage fund? Yes, we’ll tell you that, and we’ll also give you the top 5 balanced advantage funds as of August 2022 in this piece. However, let’s quickly rush through the basics.

What is a Balanced Advantage Mutual Fund?

A balanced advantage mutual fund is a hybrid fund, one that invests your money in both debt and equity segments without any set restrictions on asset allocation. When it comes to these kinds of funds, you cannot expect a fixed threshold of equity and debt pertaining to a class of assets. 

Based on market fluctuations and conditions, a balanced advantage mutual fund can change its allocation of assets. For example, when equities are performing well and trading at a high, fund managers may opt to increase allocation towards the equity segment.

Dynamic allocation funds

When the markets are on a downward spiral, fund managers may opt to reallocate the stock accordingly. This kind of mutual fund is characterised by its ability to switch among asset categories synchronously and is hence also referred to as dynamic asset allocation funds..

How Do Balanced Advantage Mutual Funds Work?

As discussed above, this class of mutual funds has an intrinsic strategy whereby fund managers can rebalance funds between the equity and debt segments based on market fluctuations. When the stock market witnesses a surge, most investors opt for the equity segment to make the most of this rise and maximize their profits. 

However, when the markets become volatile and hit a downward spiral, most investors prefer fixed-income instruments (safer). Before investing in a balanced advantage mutual fund, you must take cognisance of the following points:

  • Based on the intrinsic strategy the fund manager (and house) opted for in balanced advantage mutual funds, 65% - 80% of funds are invested in the equity segment.

  • These funds offer you a high rate of returns from the equity market while also providing safety in terms of fixed returns, accounting for market volatility. Given that the market's ups and downs are cyclical, a balanced advantage mutual fund offers you a more stable amalgamation of returns. It works towards helping you beat inflation in the long run.

Features of Balanced Advantage Mutual Funds

The stock market can prove to be very volatile, and balanced advantage mutual funds utilise this volatility to further grow your corpus. If you wish to build your wealth, here is why a balanced advantage mutual fund can prove to be your best bet:

  •  Vital Aspects: A balanced advantage mutual fund is comprised of three components – equity, debt, and arbitrage. Based on the market environment, the model of the asset allocation of the funds in question is used to determine exposure to both fixed income and unhedged equity. In most cases, the allocation towards debt is capped at 35%. 

However, if in case market forecasts predict a downward spiral, this exposure to debt can be further augmented. Also, arbitrage comprises hedged equities, which churn out a profit based on the disparity in the cash and futures market.

  • Similar to Hybrid Funds: A balanced advantage mutual fund is multi-faceted, similar to other forms of hybrid funds. As is the case in any hybrid fund, the equity component works on building your corpus of wealth, while the debt component offers you protection and safety in the case of a dip in the market. Thus, hybrid funds help you as an investor by maintaining a firm balance between rewards and risks.

  • Dynamic Allocation of Funds: When it comes to any hybrid fund, they all follow allocation criteria stipulated by SEBI (Securities and Exchange Board of India). Thus, these kinds of funds have certain limitations when it comes to adding further debt or equity to your portfolio. 

Dynamic asset funds have the capability of fluctuating between various classes of asset investment, keeping in mind market fluctuations. This re-adjustment capability ensures investors receive the maximum possible returns (from equity) while remaining shielded from market volatility (from debt).

  •  Taxation: Based on the nature of funds invested, these funds can be either taxed as equity funds or debt funds. However, you must note that most fund managers maintain a higher exposure to equity instruments to avail of the tax treatment offered to equities.  In addition, they may also use hedging/arbitrage to reduce the risk of overvalued stocks to maintain an adequate allocation towards equity.

Who Should Invest in a Balanced Advantage Mutual Fund

You should invest in a balanced advantage mutual fund, if:

  • You want your capital and income to appreciate over a long-term investment horizon
  • If you are not comfortable with a high rate of volatility
  • If you are new to the world of mutual funds and wish to avoid high risk
  • If you can tolerate moderate risk
  • If you are investing for a time horizon of over 3 years
  • If you wish to gain from returns that match equities but wish for lower volatility in NAV 

5 Balanced Advantage Mutual Funds

Fund Name

Fund Size

Return p.a. (3 years)

HDFC Balanced Advantage Fund 

₹57,779 Cr


Edelweiss Balanced Advantage Fund

₹9247 Cr


Tata Balanced Advantage Fund

₹7,109 Cr


ICICI Prudential Balanced Advantage Fund

₹47,662 Cr


Sundaram Balanced Advantage Fund

₹1,553 Cr


Note: This list is for explanatory purposes only. Investors are advised to conduct thorough research and compare arbitrage funds before investing in one. This data is as per 20 July, 2023.

In conclusion

Balanced advantage mutual funds offer you a good mix of returns, as well as safety, by diversifying your investment across equity, debt, and arbitrage segments. If you are looking to invest in the same, the Fi Money app offers the easiest and most convenient way to choose and begin your investment journey. Making use of Fi for your investments, you can avail of a wide range of benefits, including seamless account set-up, zero commission, flexible SIPs, no penalties for missed SIPs, and a whole lot more.

Fi is a platform that aims to help you manage your money better – a financial application with an in-built zero-balance savings account. With the help of Fi, you can further build your corpus of money and better organise your funds. 

Frequently Asked Questions

1. How does a balanced advantage mutual fund work?

A balanced advantage mutual fund works by investing your corpus across three market segments – equity, debt, and arbitrage. This helps you receive the maximum returns possible (via equity) while also toning down your risks (via debt). 

2. Is it good to invest in balanced advantage funds?

Consider balanced advantage funds for a long-term investment with lower volatility compared to pure equity funds. These funds effectively manage downside risks and provide decent returns with reduced volatility.

3. Which balanced advantage fund gives the highest dividend?

The HDFC Balanced Advantage Fund(IDCW) provided the highest dividend returns at 64.55% and distributed approximately 57 dividends between February 2018 and February 2023.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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All About Balanced Advantage Mutual Funds


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