Mutual funds to invest in July 2021: Kirtan Shah lists out his best picks; decodes Balanced Advantage Funds

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Balanced Advantaged Funds (BAF) or Dynamic Asset Allocation Funds (DAAF) are a sub-category of Hybrid Mutual Funds that keep changing the ratio of their exposure to equity and debt, depending on the mood of the market. So if you have these funds as part of your portfolio – is your asset allocation done? Not really, says Kirtan Shah, SRE Wealth’s co-founder & CEO, on Money Masterclass. Kirtan suggests the ideal asset allocation is a pure function of the risk profile, time horizon and goal of the investor. But not all investors seek professional financial planning advice. According to Shah, that’s where these funds come in.

Who should invest in BAF?

“Balanced Advantage Funds are meant for someone who does not have a clear view on what asset allocation is best suited for them and haven’t defined their risk profile clearly,” he said in an exclusive interview to Money9. He further adds that, BAF are best suited for investors who can’t take much volatility but want 2-3% more than debt funds in long term investing.

Do BAFs beat the market?

As BAFs comprise both equity and debt, comparing it to a benchmark index like Nifty may not be prudent as Nifty is an equity-only index. When the markets are on the rise, BAFs will not grow at the same clip as pure equity owing to their debt components. So, during a bull run, the debt component of BAFs weigh it down against, say, the Nifty. However, during a crash like the one in March 2020 – the same composition of debt and equity both helped BAF investors take a smaller hit compared to the benchmark.

Where should you invest in July 2021?

In this video, Kirtan Shah lists out the best mutual funds to invest in for someone with a corpus of Rs 1 lakh. No, these are not specifically BAF funds but a broader composition that gives diverse equity exposure to investors seeking good returns over a 7 year horizon.