Should i invest in balanced fund?

An investor can decide whether to invest in balanced funds or not by keeping in mind the following features of balanced funds:

·     Investment in balance funds involves moderate to high amount of risk

·     Minimum 3 years of investment to be on safe side

·     Returns in these funds usually range from 11-14%.

Balanced funds are a category of mutual funds with an objective of growth and stability (or regular income), where equity has the potential to meet the objective of growth and debt has the objective of stability in the investment. The balanced funds can have fixed or flexible allocation between equity and debt. Balanced schemes offer the benefit of diversity of asset classes within the scheme. A single investment gives exposure to both debt and equity.


Balanced funds either have flexible allocation or fixed allocation between debt and equity.

·     Under the flexible allocation schemes the percentage of investments between debt and equity is not fixed and varies from time to time.

·     Under fixed allocation schemes, if the scheme is equity oriented than 65% of the portfolio is invested in equity schemes and remaining in debt and if the scheme is debt oriented then 65% is invested in debt and remaining part in equity.

If you feel that your investment criteria matches with above stated features of balanced funds you should definitely invest in balanced funds.

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Some of the top performing balanced funds are:

Balanced funds are good for average investors looking to invest in equities. A lot of people follow stock markets and wish to invest in the shares offered by various companies, but they fear that they don’t have enough knowledge or don’t have sufficient time to keep track on and follow the latest buzz about the dynamic market. Balance fund is the perfect solution for them as investing directly in equity market is a risk, not everyone willing to take.

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.

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

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, and are most popular mutual funds these days. These provide an average rate of 10-13 % return to investors.

Happy Investing!

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.

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

Advantages of investing in Balanced Funds:

• Balanced funds also provide the fund manager with the flexibility of changing the debt and equity proportion depending upon the market situation. So in a bullish market, higher proportion will be attributed towards equity rather than debt.
• It enables the fund manager to book profits when the market is rising and purchase stocks at a cheaper price when the market is falling.  

Returns

Source: Groww

This shows buying a portfolio of debt fund and equity fund is better than balanced from both risks and returns perspective.

Yes, you should invest in balanced funds if you are looking to invest money in mutual fund schemes for 2-3 years with moderate risk exposure and derive benefits of investing in equities as well as debt. This allows the investor to benefit from capital appreciation as well as earning regular and stable income. Diversifying investment across asset classes also reduces exposure to risk.

Investing in balanced funds has different tax treatment. It is important to understand tax implication before you decide to invest in balanced funds.

Source: groww.in

Groww's HDFC Balanced Fund - Growth is an equity oriented fund that has consistently outperformed its benchmark. An investment of ₹5000 per month in this fund will generate ₹4,70,472 by the end of five years at annualized rates of return, while exposing the investor to moderate risk.

If you are an investor who is risk averse, Groww's HDFC Equity Savings Fund - Growth is better suited to you. The fund has generated annualized return of 10.08% p.a, meaning that an investment of ₹5000 each month for five years will increase your corpus to ₹ 3,90,549 by the end of five years.

A new investment tool called balanced advantage funds, has recently been launched. The difference between traditional balanced funds and balanced advantage funds is that the latter uses derivative instruments to manage allocation across different asset classes. The percentage of investment in each asset class is also more flexible.

You can read about more options available to invest in balanced funds here.

If you planning to invest in equity market and at the same time want to keep the overall risk level low, these funds are ideal for your investment. These provide an average rate of 10-13 % return to investors.

• The portfolio of most of these funds typically comprises of at least 65 % of the equity funds and the rest of the funds are invested in the debt funds to minimize the risk.
• The equity component of the portfolio gives the investor the opportunity for growth whereas the debt component balances the risk of the investment.
• Balanced funds are designed to handle the diversification of a risk averse investor. These funds provide benefits of both equity and debt funds by investing in a single fund.
• They are developed by the fund managers to deliver the inflation beating returns and at the same time keeping risk in check.
• To minimize the risk exposure, you can invest in balanced funds through Systematic Investment Plan (SIP). It will reduce the risk of whole portfolio and can provide investors the benefits of compounding.
• The investment period of these funds should be extended to at least 2-3 years, to maximize the returns.

Top performing balanced funds: