Is it good to invest lumpsum in balanced funds?

Thinking of investing in an equity mutual fund, it is very crucial to decide on most appropriate market capitalization to choose the fund from – i.e. among large cap, mid cap, small cap, sectoral cap or multi-cap fund category. Each category of market capitalization categories has its own advantages.

Balanced funds are good for average investors looking to invest in equities. Balanced funds are investment instrument, where an asset management company invest the money gather into both debt and equity.

These are diversified mutual funds having perfect balance between risk and returns on investment, and are most popular mutual funds these days.

Example of popular balanced funds are:

• HDFC Retirement Savings Fund - Hybrid - Equity Plan – Regular
• Reliance Regular Savings Fund
• ICICI Prudential Balanced

These are diversified mutual funds having perfect balance between risk and returns on investment. These provide an average rate of 10-13 % return to investors.

But for investing a lumpsum amount much better alternative is to consider large cap funds through SIP.

Reason:

• Though investment in multi-cap funds provide considerable flexibility to invest across multi-cap category, but large cap funds stands out on their nature of providing stability in the portfolio.
• In large cap fund, a large portion of investment is done in companies with large market capitalization. These companies are strong, reputable and trustworthy.
• Large cap companies are mature and firmly established players in the market having a strong corporate governance practices.
• Also, these companies are well researched and highly followed in market. Over a long term, these large cap funds will generate wealth slowly and steadily for their investors.
• Multi-cap funds are risky as compared to large cap funds and depend a lot on the ability of fund manager.

So, for investment lumpsum you need to invest in much safer large cap funds, with which you will be nearly assured of getting returns on your investment.

Best Large Cap Funds for 2018

1. SBI Bluechip Fund
2. Mirae Asset India Opportunities Fund
3. Reliance Top 200 Fund

Depending on your investment goal and risk petite you can park your money in mutual funds category of your choice.

Happy investing!

Yes, balanced funds are less risky for investment and if have lump sum amount to invest, we would suggest you park your money in debt funds and transfer the amount in balanced funds through STP.

Balanced funds are those funds in which the capital of the investor is diversified across different financial instruments such as stocks, bonds, debt securities, etc to limit the risks. These funds are also known as hybrid funds. 

• These funds are considered ideal for investors who want to invest in stock market and at the same time keeping the overall risk level low.
• The equity component of the portfolio gives the investor the opportunity for growth whereas the debt component balances the risk of the investment.

Types of balanced funds:

• Equity oriented: When major part of the capital is invested in the equity market and the rest in debt funds, these funds are called equity oriented balanced funds. These portfolios of these funds comprise of at least 65 % of the equity funds and the rest of the funds are invested in the debt funds to minimize the risk.
• Debt oriented: When major part of the capital is invested in the debt securities and the rest in equity market, these funds are called debt oriented balanced funds.

Balanced funds are investment instrument, where an asset management company invest the money into both debt and equity. These are diversified mutual funds having a good balance between risk and returns on investment.

Balanced funds can be of 2 types - Equity oriented balanced funds and Debt oriented balanced funds, as evident from their names, these funds invest a major portion of their investments in equity and debt respectively.

Characteristics of balanced funds:

• Highly diversified funds
• Low volatility and risk as compared to investing in investing in equity fund alone
• Tax benefits like equity funds

Returns-

Returns for this category have been strong and consistent, due to benefits from both debt and equity and fluctuations in any one category is hedged by the another.

Balanced funds is a good investment category from Returns, Risk and expenses perspective. Also, the tax benefit of a balanced fund is minimal.

Since you have cash lying with you, it may be a good idea to invest those into a good balanced fund.

Balanced funds are investment instrument, where an asset management company invest the money gather into both debt and equity. These are diversified mutual funds having perfect balance between risk and returns on investment. It is suggested to invest in these funds for an ideal investment duration of 2-3 years.

These are broadly of two types:

• Equity oriented balanced funds: Major portion of fund portfolio consists of equities, at least 65%, and rest in debts. Aim here is to minimize risk on investment
• Debt oriented balanced funds: Major portion of fund portfolio consists of debt and rest in equity. Aim here is to increase return on investment.

Characteristics of balanced funds:

• Highly diversified funds
• Low volatility and risk as compared to investing in investing in equity fund alone
• Tax benefits like equity funds

Investing in these funds can be done via lumpsum as well as via Systematic Investment Plan (SIP).

Investment via lumpsum mode provides higher returns as compared to SIP. This is because lumpsum gives more time for investment and thus the money grows faster because of the power of compounding.

An investor having INR 100 for 10 years will stay invested for the entire period of 10 years. But in case of SIP if INR 10 is invested every year for 10 years, then first installment of INR 10 will be invested for 10 years, next installment for 9 years and so on. So here the growth is less.

Lumpsum investment in a balanced fund is definitely a very good option for an investor since it provides a very good opportunity for an investor to diversify their investment and get a good taste of funds from different sectors.

Balanced funds are the ones in which there is mix of both debt and equity funds. Here also there are two types of balanced funds namely debt balanced funds and equity balanced funds. In equity balanced funds, equity share is at least 65% . So there’s a good chance of getting higher returns as compared to the market returns. While investing through lump sum , you should be knowledgeable about market trends since When the markets are high, there is a chance of correction and therefore you should avoid investing. When the markets are low, there is ample room to expand and therefore more money can be made.

On the contrary, one needs to understand the power of compounding that takes place when calculating returns on lump sum amount for example amount of 15 lakhs invested as lump sum at annual rate of 15% returns will help you achieve around 60 lakhs in 10 years but with the help of SIP of around 10,000 a month it would fetch you around 25lakhs . This huge difference is created due to the power of compounding in lump sum investments. In SIP you tend to have weighted average returns which will always help you secure average returns no matter how the markets are performing. 

Considering, the knowledge of markets, your willingness to take risks and safety of your investments you should choose your options wisely