Investment in the right mutual fund can be very beneficial to earn returns on your investment at the same time it can be a difficult job to pick the right mutual fund plan for you especially when there are a lot of options available in the market.
If an investor is looking to earn a good amount of returns at the same time He/She is willing to invest its funds in a volatile or dynamic market such as equity than balanced funds can be a great option.
Balanced mutual funds not only invest your money in equity but at the same time, your money is also invested in the debt market for stable returns.
Balanced funds offer you the best risk and reward ratio on your investment because your money is invested in equity which can offer your maximum returns because of high volatility and at the same time your money is also invested in debt instruments that can provide your stable returns on your investments.
Equity provides your maximum gains while debt investment works as a shield to protect your gains just in case equity investments do not perform as per expectations.
Types of balanced mutual fund
Every investor has a different goal and objective regarding their investment. The risk tolerance of every investor is different because some investors want to invest the majority of their funds in the equity market while some investors want to invest only a small portion of their funds in the equity market.
Because of different goals and objectives in investment, there are different types of balanced mutual funds available to invest.
Aggressive hybrid funds – Aggressive hybrid funds schemes are suitable for those investors who want to take advantage of the volatile and dynamic equity market to make profits. In these schemes majority of investor’s asset is invested in the equity market, about 65%-80% portion of assets can be invested in the equity market and remaining 20%-35% portion of an asset can be invested in debt instruments. Aggressive hybrid funds are suitable for those investors who have a high-risk tolerance.
Balanced hybrid funds – Balanced hybrid funds are an excellent investment option for those investors who want to maintain an equal balance of investment in both the equity and debt market. In balanced hybrid fund schemes, a 40%-60% portion of assets can be invested in the equity market, and similarly, a 40%-60% portion of assets can be invested in the debt market.
Conservative hybrid funds – Conservative hybrid funds are suitable for those investors who have low-risk tolerance and want to invest the majority portion of His/Her assets in a stable market such as debt instruments. In these schemes only 10%-25% portion of assets is invested in equity and the remaining 75%-90% portion of assets is invested in the debt market.
Advantages of balanced mutual funds
Diversification – Since balanced mutual funds allow you to invest in both equity and debt markets which make your investment portfolio diversified. Diversification is extremely important when an investor wants to earn maximum profits on its investments. Diversification allows you to pick the best options from the equity and debt markets.
Tax benefits – In balanced mutual funds schemes funds managers has authority to shift assets from equity to debt market and vice versa according to the trend of the market, assets can be shifted without presenting investor so it saves tax. If investors itself shift assets from equity to debt market or vice versa then it can cost investor extra tax.
Re-balancing of funds – Balanced mutual funds allow an investor to maintain a diversified portfolio, investor’s asset is invested in both equity and debt market which enable investor re-balance or shift assets from equity or debt market or vice versa as per the market trend. Re-balancing of assets allows the investor to prevent any major loss and earn maximum returns from market swings.
Disadvantages of balanced mutual funds
Risk – Since your money invested in both equity and debt which also be risky because the equity market is always dynamic and changing with the global event so if the equity market moves in an unpredicted trend then it can cause loss to the investor.
Top 10 balanced funds of 2020
|Fund||NAV (INR)||3-Years return %|
|Axis Triple Advantage Fund||22.882||8.3|
SBI Multi-Asset Allocation Fund
|HDFC Multi-Asset Fund||36.82||6.1|
|Axis Equity Saver Fund||14.05||6.4|
|Kotak Equity Savings Fund||15.7527||6.2|
|SBI Equity Savings Fund||14.27.16||4.8|
|Edelweiss Balanced Advantage Fund||27.55||8.4|
|L&T Dynamic Equity Fund||27.349||6.7|
|DSP BlackRock Dynamic Asset Allocation Fund||17.316||8|
|Kotak Debt Hybrid Fund||35.8206||6.1|
Who should invest in a balanced mutual fund?
Balanced mutual funds can be an excellent option for those investors who are willing to invest their money in both equity and debt market since investing your assets in equity market means you are putting your money in a dynamic and volatile market which is always changing with global events, which can be risky if equity market starts moving in unpredicted trend.
At the same time, a dynamic and volatile market can be always to earn more returns than a stable market such as debt instruments.
Balanced mutual funds can be a good investment opportunity for those investors who are willing to tolerate a low to moderate percentage of risks. Investors who are not willing to take any risk on their investments should prefer stable markets such as debt instruments.