Top 5 Balanced Mutual Funds

Below is the list of best performing balanced mutual funds to invest in India.

Name of Fund 5 Year Returns (p.a.) Scheme Category
Sundaram Equity Hybrid Fund 12.34% Aggressive Hybrid Fund
HDFC Balanced Advantage Fund11.37% Dynamic Asset Allocation
ICICI Prudential Equity & Debt Fund12.78% Aggressive Hybrid Fund
DSP Regular Savings Fund9.22% Conservative Hybrid Fund
Axis Regular Saver Fund9.50% Conservative Hybrid Fund
These funds will give you the growth of equity with the cushion of debt. These funds invest in both equity and debt as per the defined asset allocation.

Define Balanced Funds?

Balanced funds are hybrid fundsthat invest in both equity and debt market in specific ratios. These funds allow investors to diversify their portfolio with a mix of low to medium risk stocks. As the funds include both equity and debt, they stand to be ideal for first time investors.

Balanced funds are also called hybrid funds that diversify among two or more asset classes. Majority of the time, these funds are equity oriented that considers up to 65% of the fund’s portfolio invested in equity at all times. The crucial benefit of a balanced fund is that it secures the capital appreciation and a safety net against the risk factor.

What are the advantages and disadvantages of balanced funds?

The major benefit of balanced funds is that it offers a diversified portfolio. This enables investors to invest in one fund that takes care of both risk and returns. Secondly, it has a low expense ratio. Meaning, the operating expense of these funds is less when compared to other equity related instruments. The volatility of balanced funds is also less than other equity related funds. Hence, with low volatility comes low risk. These funds are ow risk bearing instruments that are ideal for first time investors.

On the downside, balanced funds have pre-set asset allocations that might not match the investor’s preferences. Here, the investors do not have the freedom to choose their preferred stock. Also, the returns in balanced funds are safe but stodgy.

Are capital gains from balanced funds are tax free?

No, capital gains from balanced funds are not tax free. They are taxed based on orientation of the funds. Meaning, if you intend to invest in equity oriented hybrid funds for more than a year, long term capital gains (LTCG) apply over Rs 1 lakh on equity component at the rate of 10%. Similarly, short term capital gains are taxed at a rate of 15%.

The debt oriented hybrid funds are taxed like other debt instruments. STCG is added to the investor’s income and taxed based on his income tax slab. However, LTCG after indexation is taxed at the rate of 20%.

Is it the right time to invest in balanced funds?

The time factor in mutual funds does not exist. It depends on the investor’s financial goal and willingness to invest whether he is ready for this commitment. As mutual funds are not immune to the market, your investment will always be at risk.

The time to invest in a mutual fund is always now. However, before making this decision you need to consider your financial goal and risk tolerance.

Is a balanced fund a good investment option?

Mutual funds can only be ranked based on various factors like risk tolerance, financial goal, diversification of the portfolio, and tax benefits. Hybris funds are typically equity oriented funds that invest minimum 65% of its sum in equity stocks. These funds are ideal for investors looking to park their funds in equities but have low tolerance on risk. As these are diversified funds, they have a perfect mix of risk and returns.

Hybrid funds provide investors with the benefits of both equity and debt funds. The equity stocks allow investor’s portfolio to grow whereas the debt stock balances the level of risk.

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Investment in mutual funds or any asset class comes with an inherent risk. This is just a web-based tool for getting a rough estimate about the future value of your SIP/lump sum investments. The calculations are based on projected annual returns and periods. The actual annual returns may be higher or lower than the estimated value and it may have a significant impact on the final returns/goals.
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