NJ Mutual Fund is
coming out with a NFO in the form of NJ Balanced Advantage Fund.
NJ Balanced Advantage
Fund as the name suggests, would be a Balanced Advantage fund.
The fund would be open
for subscription from October 08, 2021 to October 22, 2021.
NFO details for NJ Balanced Advantage Fund
|
Scheme Opens |
08/10/2021 |
|
Scheme Closes |
22/10/2021 |
|
Fund Manager |
Mr. Rishi Sharma |
|
Benchmark |
Nifty 50 Hybrid
Composite Debt 50:50 Index |
|
Minimum Investment |
5,000 |
|
Fund Category |
Dynamic Asset
Allocation |
|
Exit Load |
Nil if redeemed or
switched after 3 months 1% if redeemed
within 3 months |
Additional reading: Click Here to read about how to build a mutual fund portfolio.
NJ Balanced Advantage
Fund would be a dynamic asset allocation or balanced advantage fund.
It would also be the first ever mutual fund
scheme from the house of NJ mutual fund.
With this fund, NJ would be foraying into
the already growing world of AMC’s.
It has already been one of the largest
distributors of mutual funds for quite some time now.
NJ 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.
NJ Balanced Advantage Fund Allocation
The asset allocation
for the fund would be something like this
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity
Related instruments including derivatives |
0 |
100 |
|
Specified Debt
Securities |
0 |
100 |
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.
Features of NJ Balanced Advantage Fund
NJ balanced advantage fund would be a
dynamic asset allocation or balanced advantage fund.
It will invest in both equity and debt but
in varying and flexible numbers.
It will be first mutual fund scheme from
the house of NJ mutual fund.
It will follow an in house rules based
active investing model.
It can move anywhere between 0-100% in equity.
For tax calculation purposes, it will be
considered an equity fund.
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What is a balanced advantage 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 NJ Balanced Advantage Fund
For the purpose of taxation, NJ 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.
Should you invest in NJ Balanced Advantage
fund?
This balanced advantage fund would be the
first ever mutual fund scheme from the house of NJ mutual fund.
There is no history with regards to both
the fund house as well as the fund manager, therefore there is not enough
information available to dissect and understand the functioning with this new
fund.
Since this is a balanced advantage fund,
there is enough scope for the fund manager to move across asset classes.
Every fund manager in the dynamic asset
allocation category has the freedom to manage the fund as per her liking therefore
there is no one method and comparison.
It is better to allow the fund progress for
some months before even considering it, for the moment one can skip it.
Unlike equity funds, a balanced advantage
fund has less restrictions and more flexibility meaning every fund manager will
manage it in a manner that she feels fit.
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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