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Worried about valuations? Go for a balanced advantage fund, say experts

Investors who run an asset-allocated portfolio with periodic rebalancing can manage without them

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Automating asset allocation enables investors to buy low and sell high, something that is difficult for them to do on their own due to behavioural biases

Sanjay Kumar Singh New Delhi
With the Sensex closing in on the 50,000-mark, the euphoria in the equity markets is palpable. However, as the monthly outflows from equity mutual funds (MFs) demonstrate, investors are also worried about high valuations. Many fund managers and advisors are currently suggesting that investors take exposure to balanced advantage fund (BAF)/dynamic asset allocation fund (DAAF) to cope with this environment.      

Each fund house has a model based on which it decides how much equity allocation its BAF/DAAF will take at different market levels. As markets turn expensive, these funds reduce equity exposure, and vice-versa.

“Currently, investors are becoming