Balanced Advantage Mutual Funds – Reduces Risk and gives good return at the same time !

In the world of mutual funds, there are various kinds of categories for different requirements and risk appetite. One of the categories I want to talk about today is the “Balanced Advantage” Category.

What are Balanced Advantage Mutual funds?

In one line, a balanced advantage fund dynamically shifts between equity and debt depending on the market valuations. What it means is that when the markets are over heated and high, the fund decreases its exposure to equity and move the money into debt, so that if the markets fall, the down side is protected.

In the same way, when the markets are on the lower side, the fund increases the exposure to equity and reduces the debt side.

This strategy significantly reduces the volatility of the fund compared to an equity fund and at the same time, the returns potential also comes down.

A lot of funds in this category also name their funds as “Dynamic Asset Allocation Fund” rather than “Balanced Advantage”

Some of the examples of the funds in this category are

  • ICICI Prudential Balanced Advantage Fund
  • Motilal Oswal Most Focused Dynamic Equity Fund
  • Aditya Birla Balanced Advanced Fund
  • Kotak Balanced Advantage Fund
  • Reliance Balanced Advantage Fund
  • HDFC Balanced Advantage Fund

How does a Balanced Advantage Mutual fund work?

A balanced advantage fund uses a predefined algorithm and based on Market PE or P/BV or some other internal indicator to determine if markets are on the higher side or lower side and then based on that they keep increasing or decreasing the equity exposure.

To explain you more about this, I will take an example of how the ICICI Prudential Balanced Advantage fund which was the first fund of this type in the mutual fund Industry and very successful in that category.

Disclaimer : I am taking the example of ICICI balanced mutual fund only because it’s the biggest in the category and quite old one in Industry and we have some data to show. It’s not a recommendation to buy. We have some equally good funds from other AMC’s also.

They use P/BV (price to book value) as an indicator to decide is markets are over heated or not.

Equity Exposure changes with Market movements

Below you can see how the equity exposure has changed over time from Apr 2010 – Sept 2014. You can see that equity exposure increases when Sensex levels go down and vice versa.

balanced advantage equity exposure

Limits downside and upside

The main benefit of Balanced Advantage funds is that it controls and extreme upside or downside. So you will not see very deep losses, but at the same time, you will also not see very high profits.

However, the balanced advantage funds will provide decent market returns (but not comparable to pure equity funds)

balanced advantage wealth creation

Even in the flat markets, you can see that the balanced advantage category has generated positive returns by taking advantage of the volatility.

balanced advantage performance flat market

Who should invest in Balanced Advantage (or Dynamic Asset Allocation) funds?

Now the big question is – Which kind of investors should invest in Balanced Advantage fund and When?

Who should invest?

It’s mainly for those investors whose focus is on reducing the risk, but at the same time enjoying better returns than Fixed Deposits. The fund value will still be volatile, but the intensity will not be as high as a pure equity fund. From Returns point, it will give decent return of 2-3% above FD returns, but that is all you should expect over a long term.

When to Invest?

As you have seen that the equity exposure is already controlled by the fund itself, you can actually invest anytime you want. There is no need to time the market, because the fund itself times the market internally. There are no issues if you want to put lump sum or SIP.

Who should not invest?

An investor who wants higher return potential and can take the higher volatility, should not be ideally investing in these funds. However, if you are unsure of the markets levels and want to play safe, you can invest lump sum in balanced advantage fund and then setup a STP (Systematic transfer plan) to an equity fund. This will reduce the risk to some extent.

Important: Don’t confuse this category of funds with “Balanced Funds”. Balanced Funds are those mutual funds that have a mix of equity and debt in their portfolio with equity exposure of around 65-70% and rest Debt.

A good choice for Retired Investors

I think these kinds of mutual funds are a very good choice for retired investors who want returns better than the fixed instruments and at the same time, can’t handle too much volatility in their portfolio. So some part of their portfolio can surely be invested in balanced advantage or dynamic asset allocation funds (same thing, but different name)

If you want to invest in balanced advantage mutual funds, you can contact the Jagoinvestor team to know the process and get a well-designed portfolio.

Let me know if you have any questions regarding this fund of a mutual fund? Was it clear enough?

Investing in Mutual Funds vs Direct Stocks – Which is better option?

Should you invest directly in stocks of companies or rather buy mutual funds? Which option is more “suitable” for you?

A lot of investors feel that they should invest directly in shares, because that’s what mutual fund do at the end of the day, however stock investing is a very different game altogether and the dynamics are very different there. Let’s see them one by one.

which is the best option to invest your hard earned money? Direct stocks or mutual funds?


#1 – Knowledge Required

Most of the people think that investing in stocks is as simple as buying some stocks using hot tips and then waiting for the stock to become multibagger in next few months / years.

Experienced investors know that nothing is far from truth. They know that it requires great amount of knowledge and expertise to study the company’s balance sheets and choose the right stocks for future. There are investors who have spent their life time in studying how to do stock investing and still they make big mistakes.

So coming to the point, stock investing is not a child’s play. It takes years of hard work and a lot of knowledge to pick the correct stocks, where as you do not need much knowledge when it comes to mutual funds investing.

Infact, mutual funds as a product is created for those investors who can’t spend much time themselves to study stock investing. You can just pick a “reasonably good” mutual fund on your own using some basic rules or hire a financial advisor who can do that for you.

#2 – No control on stocks chosen

When you invest in mutual funds, you can not control which stocks go in and go out from time to time. That is the job of the fund manager. You only invest in the mutual fund and give your money to the professional management. So you have ZERO control on the stocks which are chosen by the fund manager.

However when you do direct stock investing, you are the fund manager and you have full control over it. So based on your study, gut feeling, logic, hearsay, hot tips, you can buy and sell the stocks, but that’s not the case with mutual funds.

The person who is taking the decision of buying and selling of stocks is a professional who knows the game.

#3 – Professional Manager

There is a different between a pilot controlling the airplane and the doctor doing the same. There is a great chance that the airplane will crash if it’s handled by a doctor (unless he an additional qualification of flying planes).

The same happens when it comes to equities. A mutual fund is managed by a very high quality and professional fund manager who has years of knowledge of various things like economy, credit cycle, interest rates cycle, economy, fundamental analysis, taxation, businesses and has years of experience of equity markets across various countries. They have completed professional studies related to wealth management.

Structure of Mutual funds


When they manage and take decisions on which stock to buy or sell, they have very deep understanding the sectors and that business. They visit the companies, their factories and meet their top management. They have hidden knowledge sometimes on what is going on within the companies and can predict the future of companies in a better way compared to a normal person.

However, most of the equity investors feel they can successfully invest in direct stocks with great expertise for long term and generate great returns just like a professional manager.

An IT engineer sitting in a cubical at TCS or Infosys can surely buy some stocks based on hot tips, but can’t match the expertise of a professional fund manager who earns crores of salaries in fund houses (and if they can match, it then why not leave your job and shift to Mumbai)

#4 – Volatility & Return

This is very important point, hence read very carefully.

When you buy a mutual fund, you are investing a very large portfolio of different stocks which can range from 30-100 companies.

So your profits and losses are dependent on a large number of stocks, hence the risk is distributed among those stocks and in the same way the returns you get is the average of all. In short there is lower risk and lower return potential compared to a small 4-10 stock portfolio.

When you are a direct stock investor, how many stocks will you buy will decide how volatile is the returns from your portfolio. Most of the direct equity investors bet on very few stocks, they buy 5-10 stocks only (some times only 2-3). So each stock size is quite large in the portfolio and any change (up or down) impacts the overall portfolio return.

Most of the investors are not equipped to handle very high return or very high loss. If there is very huge return, investors sell their stocks and want to lock in the profits and in the same way if there is a steep loss, they want to sell it off and get out of the “risky” game.

In both the cases, investors feel the urge to get out and wait on the sideline, rather than stay in the game – because it’s emotionally very over whelming to handle it.

This is exactly the reason why you will find investors who have a mutual fund for last 10 yrs, but very rarely you will find an investor holding the same stock for 10 yrs.

#5 – Automatic Investments (SIP)

When you invest in mutual funds, there is a standard facility of automatic investing called SIP . This is a great way to automate your investing and create a habit of regular investing. This suits an investor who wants to systematically invest a fixed amount each month on a given date.

However when you buy stocks, you have to manually invest in each stock every month if you want to regularly invest in them. This becomes practically challenging and inefficient because human mind is lazy as per design. No matter how many reminders you set and how “committed” you are, after few months of “success” , it all falls apart for 99% of the investors.

Some portals like HDFC securities have now started the SIP in equities also, so what I am saying does not apply to each and every platform.

#6 – 80C Benefits

Direct stock investing has no 80C tax benefits, however if you invest in ELSS (tax saving mutual funds), you can avail the taxation benefits.

This is one small reason why you can prefer mutual funds over direct stocks

#7 – Active vs. Passive Involvement

Mutual funds are made for those investors who have no knowledge and no time on their side. Once you invest in mutual funds, your involvement is very limited in reviewing the funds over time. The important decisions of which stock to buy, when to buy, how much to buy is taken care by the fund manager and his specialized team of 5-20 research analysts.

How mutual fund works?

However, if you decide to directly invest in shares, all this has to be done by you. Even though it’s not exhausting like day trading, but still you have to study companies, keep a track of what’s happening with each companies in your portfolio, control your emotions (true for mutual funds also) and what not.

In short, you have to be quite active in direct stock investing. It gets tough to focus on stock investing because of so many things in life.

#8 – Fees and Cost

When you buy stocks directly, you only have to incur the demat account charges along with STT and transaction charges if any.

However when you invest in mutual funds, you have to pay something called as Expense Ratio. This is the fees which is charged on daily basis out of the funds, however you never see it yourself and all the NAV’s which are published are post-expense ratio.

These charges are in range of 2-2.5% for equity mutual funds (less charges for debt funds). So this is one point where direct stocks are better than mutual funds, but only if you are able to generate the same returns like mutual funds yourself. There is no harm to pay the fees if the fund manager is able to generate value for you in your wealth creation process.

Investing in stocks directly, just because you will save expense ratio is like not spending money on salt while preparing a dish, because you will save some money. You need to focus on the final taste.

However if you can do successful stock investing on your own, it does not make any sense to invest via mutual funds.

#9 – Emotional Bias

This one is Epic.

Your creation is always special for you and hence when you buy a stock based on whatever research and study you do, it gets very tough later to accept that you were wrong (incase you were) . You will become very biased about your buying decision and will not sell at the right time.

It gets very tough to accept that you were idiot in past for believing in a stock purchase decision and will not sell when the right time comes.

This is exactly why bad equity investors become long term investors. They stay with bad investments for many years and eventually loose. It’s your money and it’s your decision.


However when you invest in mutual funds, all the decisions are taken by a professional who is earning a salary for performance. They take decisions based on logic and keep the emotions out of their system. If their process says “SELL” , they sell it . If it says “BUY” , they buy it ! .


Finally, there are some benefits of going directly with stocks and in the same way with mutual funds. However , direct stock investing is a specialized game to play and it’s not everyone’s cup of tea. For those investors, who want to play little safe with their wealth creation, should choose equity mutual funds rather than trying to burn their fingers in direct equities.

Disclaimer – I would like to disclose that we as a company deal in mutual funds (click here if you want to invest in mutual funds), however we have tried to make sure that we are not biased when we are talking about direct stocks vs mutual funds. In some cases, direct stocks can really outperform mutual funds, but for general masses, mutual funds are better structured products when it comes to long term wealth creation.

4 Steps to check your Aadhaar authentication history online (VIDEO INSIDE)

Do you know where was your aadhaar number used for various purposes in the past?

Aadhaar has now become a central part of our life and it’s integrated with so many services. You have your critical information linked to aadhaar, and if you allow a service to authentic yourself using aadhaar number, it fetches your data and uses it.

While it has made life easy and simple, it also opens up to the chances of data leak and someone else using your aadhaar to authenticate for some service.

UIDAI has come up with a service where you can check Aadhaar Authentication History online. Below is a quick video which shows you how you can do it.

The main objective or purpose of this authentication process is to verify the identity of a person and to avoid the fraudulent cases. It helps the service provider to identify whether the person who is requesting for the service is trustworthy or not.

How does the process of authentication work?

When you submit your Aadhaar card at anywhere as an identity proof, that service provider asks you either to submit a copy of your Aadhaar card or sometimes he may ask for your bio-metric details like fingerprint or IRIS.

These details are then submitted to the CIDR of UIDAI i.e. Aadhaar verification department. This request can be initiated through any devise like laptops/desktops or mobiles. CIDR then cross checks this information with the details on UIDAI.

If your details match then the service provider will approve your request.

Aadhaar authentication can be done on the basis of 3 means –

  • Bio-metric details – Finger print and IRIS
  • Demographic details – Name, age, gender, DOB etc.
  • One time password – on registered mobile number

Any service provider where you submit your Aadhaar card as an ID proof can request CIDR for this authentication.

4 steps to check your UIDAI authentication history?

Let’s see these steps briefly –

Step #1: Go to the website of UIDAI or you can click here, and then click on “Aadhaar authentication history”

Aadhaar authentication

Step #2 – Enter your Aadhaar number and security code and click on generate OTP.

Aadhaar authentication

Step #3 – Now select the type of authentication history which you want to check. Then select the time period and how many entries you want to check (You can select maximum 50 entries). Finally enter the OTP you received on your registered mobile number after step 2 and click on submit.

Aadhaar authentication

Step #4 – This is the last step of this process where you can see the list of all the entries of authentication process.

Aadhaar authentication

Do let us know if you liked this information and if it helped you !