Mutual funds provide you a good opportunity to earn inflation-beating returns in the long term. The historical data shows that mutual funds have proven to be a better investment instrument as compared to fixed-income avenues, such as fixed deposits, recurring bank accounts, etc.
However, you also need to understand that mutual funds are market-linked, and that is why their Net Asset Values (NAVs) can go up and down when the markets are volatile. And hence, there will always be short-term downfalls in your investments.
You cannot avoid such downfalls in the market, but you can limit their impact on your investments. And one way to do this is to shift your investments to balanced arbitrage funds.
What are balanced arbitrage funds?
Balanced arbitrage funds are hybrid mutual funds that invest in a combination of debt, equity, and arbitrage instruments. The main aim of such funds is to offer reasonable returns along with capital preservation.
Fund managers of balanced arbitrage funds follow dynamic asset allocation strategies, which means that exposure to debt, equity, and arbitrage instruments is flexible and can change from time to time.
During equity favourable scenarios, the fund manager increases equity exposure, and when the equity markets seem to decline, the fund manager increases debt exposure. This way, your investments remain protected from market fluctuations.
Steps to switch your investments to Balanced Arbitrage Funds
By now, you must have understood that you can protect your investments from short-term market volatility by switching them to balanced arbitrage funds. But do you know how you can switch your investments from one mutual fund to another? Don’t worry. We will explain the process to you.
The first thing that you need to do is make a switch request with your Asset Management Company (AMC). You can do this by filling up a fund switching form or writing an e-mail or a letter to the AMC, specifying the switch details.
If you want to switch your investments within the same fund house, the process is simpler. You can simply fill up a switch form with your AMC and specify the number of units you want to switch along with the names of the current mutual fund and the destination mutual fund. There is no issue with the settlement period if you’re switching your investments within the same fund house.
But if you want to switch your investments from one mutual fund to another mutual fund of a different fund house, the process is a bit complex. You will have to first apply for the redemption of your current mutual funds and wait till you receive the proceeds in your bank account. Then, you can reinvest your money in the balanced arbitrage funds of your choice.
Moving your investments to balanced arbitrage funds is a great way to protect them from market volatility. However, before you decide to switch your investments from one mutual fund to another, make sure that you’ve achieved your investment objective. You should also consider other factors such as exit load, lock-in period, and tax implications before making any decision.
With Tata Capital Moneyfy App, you can invest and switch between mutual funds seamlessly. This app can help you start a SIP or invest through lump sums.