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Balanced Advantage Funds

Background

Balanced Advantage Funds (BAFs), also called dynamic asset allocation funds, shift between equity and debt using valuation or quantitative models.

Explanation

When valuations look cheap, BAFs increase equity exposure; when markets look expensive, they shift towards debt, often while maintaining an equity-oriented tax status. For investors who do not want to manage asset allocation manually, BAFs can be a one-fund solution for a portion of the portfolio.

Example

Instead of juggling multiple equity and debt funds, a retiree might put part of the corpus into a BAF that automatically reduces equity after a big rally and adds it after a correction.

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