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What are balanced funds?

What are balanced/hybrid funds? What are the types? Should i invest in balanced funds?

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5 Approved Answers

aniket

Balanced funds are funds that invest some proportion of their total corpus in equities and the remaining in debt securities. They provide a diversified portfolio of debt and equity and thus help in minimizing risk exposure of the investor.

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.
  • The investor also does not need to re-balance his portfolio, as it is done by the fund manager.  

Disadvantages and risks of investing in Balanced Funds:

  • Though balanced funds are relatively less risky than equity funds, they are not entirely devoid of risks. They are susceptible to market volatility as majority of the funds are invested in the stock market.
  • Investing in balanced funds might get a little confusing for investors as they have two benchmarks - one for equity and one for debt. However, selecting the right mutual fund house will help ease this process for the investor.

Balanced funds are usually better suited for customers looking to invest money for 2-3 years. Before selecting the balanced fund that you want to invest in, it is advisable to compare the performance of that fund with its benchmark, which is usually Crisil Balanced Fund Index.

You can also check out Groww's ICICI Prudential Balanced - Growth Fund and HDFC Balanced Fund - Growth as suitable investment avenues. Both these funds have consistently outperformed their respective benchmarks and are top performing portfolios at Groww. You can evaluate other available options here.

Hope this answers your question!

Pijush Kanti Biswas

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:

So, 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.

Example of popular balance funds are:

Happy Investing!

Vaneet

A balanced fund is a fund which combines a stock component, a bond component and sometimes even a money market component into a single portfolio. These are also known as hybrid funds. These are preferred by investors looking for a mixture of safety, income and modest capital appreciation.

So balanced funds consists of two components:

  • Equity component- It aims to provide growth to the portfolio that outpaces inflation
  • Debt or bond component- This component aims to create an income stream and provides stability to the portfolio

There are two types of balanced funds:

  1. Equity oriented
  • In this major part of the capital is invested in equity market and rest in debt funds
  • At least 65% in equity and rest in debt
  • Aims for aggressive capital appreciation

2. Debt Oriented

  • Major part of the capital is invested in debt securities
  • Low risk
  • Regular returns

To consider investments, lets look at the advantages of these funds

  • Low risk and volatility
  • Diversification- invests in a mix of equity and debt
  • Designed to produce better returns than inflation
  • Stable fund which provides good returns in the long run

So ti summarise, balanced funds are funds which invest in a mix of equity and debt. These funds are good for investors who do not like to take much risk.

Various balanced mutual funds

Tanya

Balanced funds are mutual funds that invest that invest in various financial instruments including bonds, stocks, debt securities, etc. These funds are preferred by investors who have a low risk appetite.

There are two types of balanced funds:

  • Equity-oriented: In this case, majority of the fund is invested in equity instruments.These funds exercise aggressive capital appreciation and the interest income from debt investment is considered to be secondary.
  • Debt-oriented: In this case, major of the fund is invested in debts and therefore has low risk. These funds provide regular returns in the long run.

Advantages of balanced funds:

  • Low volatility
  • Diversification
  • Low risk
  • Protects from inflation
  • Better post tax returns
  • Better risk adjusted returns in the long run

Arpit Chandak

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.

Should I invest in balanced funds?

  • 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:

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.
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