December 17, 2021

Ships don’t sink because of the water around them but because of the water that gets inside them. Similar is inflation, it sinks your returns.


With interest rates on bank fixed deposits hovering around 5-5.5% for all major banks and inflation more than these interest rates, investors are in a fix as to where they should invest their money that will earn better returns and provide reasonable safety.


Alternate comes to private company fixed deposits and bonds. Even here interest rates on good quality bonds or corporate deposits are around 6.5-7% which is taxable. And even this return is hardly sufficient to beat the inflation. Equity investments though offer good returns over long term (minimum 5 years or more) but are riskier for short term.


In such scenario if the investment horizon is 3 to 5 years then balance advantage funds offers a good option to bank FDs. These schemes invests between 30% to 90% in equity markets depending on the parameters they set for determining the equity level in their portfolio and rest they invest in arbitrage and bonds. So even if the equity markets fall, in first year one may see flat or even small negative returns BUT as the holding period increases, returns earned on bonds and arbitrage portion will make overall returns positive. And over 3 year’s period even equity correction also completes the cycle and starts giving good returns.


Mahindra Balance Advantage Fund – Mahindra Manulife is a joint venture between Anand Mahindra group and Manulife Inc – a Canadian fund manger managing over 300 billion US $. After Manulife entered into this joint venture about 1.5 years back all their funds are ranking in top quartile.


The AMC has launched their balance advantage fund. Most of the BAF schemes today either use fundamental or technical or quantitative assessment to determine the equity allocation. This AMC will not only use fundamental business analysis tools like historical and forward P/E, earning growth, interest rates Vs yields, growth outlook etc but will also use technical indicators like market momentum, growth outlook, lead & lag indicators and even liquidity in the markets.


We at InvestmentMitra feel that this scheme is worth giving a look. Should your investment horizon be 3 to 5 years, you must consider this fund for your investments.  Do contact your InvestmentMitra or whatsapp to 9254673750 or write info@investmentmitra.comfor investing into this scheme or for any query related to your personal finances.


Happy investing!

Team InvestmentMitra



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