LIC Mutual Fund is
coming out with a NFO in the form of LIC Balanced Advantage Fund.
LIC Balanced Advantage
Fund as the name suggests, would be a balanced advantage fund.
The fund would be open
for subscription from October 20, 2021 to November 03, 2021.
NFO
details for LIC Balanced Advantage Fund
|
Scheme Opens |
20/10/2021 |
|
Scheme Closes |
03/11/2021 |
|
Fund Manager |
Mr. Yogesh Patil Mr. Rahul Singh |
|
Benchmark |
LIC MF Hybrid
Composite 50:50 Index |
|
Minimum Investment |
5,000 |
|
Fund Category |
Dynamic Asset
Allocation |
|
Exit Load |
Nil for 12% of units
if they are redeemed within a year 1% for remaining
units if they are redeemed within a year. Nil if redeemed or
switched after a year. |
LIC Balanced Advantage
Fund would be an open - ended dynamic asset allocation fund investing in both
debt and equity in varying proportions.
LIC
Balanced Advantage Fund Investment Objectives
The investment
objective of the fund is to generate capital appreciation by dynamically
allocating its assets between equity and specified debt securities.
There is no guarantee
that the investment objectives of the scheme would be achieved.
Additional reading: Click Here to read everything you ever wanted to know about a NFO mutual fund
LIC Balanced Advantage Fund Allocation
The asset allocation
for the fund would be something like this
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity
Related instruments |
0 |
100 |
|
Debt and Money
market instruments |
0 |
100 |
|
Units issues by
REITS and InvITs |
0 |
10 |
The above figures are
only indicative and not fixed, the fund managers have the liberty to move
across the asset classes depending upon prevailing market conditions as long as
they remain within the mandate permitted.
The fund can also
invest in REITs and InvITs if so desired.
What is a balanced
fund?
A dynamic asset allocation fund is more
popularly known as a balanced advantage fund.
A balanced advantage fund is a type of
hybrid fund.
It invests in debt, equity and arbitrage
positions although the allocation is not fixed and can also sit on cash if the
fund manager desires so.
Unlike other hybrid funds like multi asset,
aggressive and conservative, a dynamic asset allocation or a balanced fund does
not have a fixed mandate to follow.
The fund manager can move across different
asset classes based on the prevailing market conditions.
The importance of a balanced fund is more
felt during a bearish market phase since it can cut down its equity portion and
at the same time make periodic equity purchases in the dip.
This is unlike other pure equity funds who
at all times have to maintain their mandate irrespective of the market
situation.
Taxation on LIC Balanced Advantage Fund
For the purpose of taxation, LIC Balanced
advantage fund qualifies as an equity fund and the taxation charges applicable
on it are as follows:
LTCG
Long term capital gains tax better known as
LTCG is applied on any equity mutual fund when the gains from an equity mutual
fund which is held for more than a year is more than 1 lakh.
The LTCG rate is 10%.
Capital gains up to 1 lakh are exempt for
taxes.
There is no indexation benefit when
calculating LTCG.
STCG
Short term capital gains tax better known
as STCG is applied on gains from an equity mutual fund which is held for 12
months or less.
The STCG rate is 15%.
There is no ceiling benefit in STCG like
the 1 lakh ceiling in LTCG.
STCG is charged on from Re 1.
Investment
Strategy of LIC Balanced Advantage Fund
The fund
will invest in equity and fixed income asset classes based on the fund house’s
internal model.
This model
will take into account factors such as PE and P/BV ratio and prevailing
interest rate.
This model
is designed to reduce human bias.
Exposure
to equity will be derived by this model.
Features of LIC
Balanced Advantage Fund
The fund
will adopt the Fundamental Based Mathematical Model (FMM).
The fund
will be tax efficient since for tax purposes it will be considered an equity
fund.
The fund
will aim for equity returns with low volatility and stability.
Who can consider
LIC Balanced Advantage Fund?
Investors
who are seeking long term wealth creation.
Investors
who are seeking diversification.
Investors
seeking equity like returns with stability.
Investors
unsure of market valuations.
LIC
Balanced Advantage Fund Options
LIC Balanced Advantage fund provides investors with the following two
options
Growth: This option is most suited for investors who are not seeking
dividends or who are not dependent on mutual fund dividends as a source of
monthly income and would rather see their capital appreciate.
Income
Distribution cum capital withdrawal :This option is
most suited for investors who are seeking dividends or who are dependent on
mutual fund dividends as a source of monthly income and are not looking for
capital appreciation.
In case you do not opt for a particular
option between growth and income distribution cum capital withdrawal option
then the default option would be growth.
With a balanced advantage fund, how it does
in a bull market is of less importance compared to how it performs in a bear
market and that is how its nav should also be judged.
If high returns is all you focus on then a balanced advantage fund should not take your time and money.
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