Balanced Mutual Funds
Balanced mutual funds are also known as hybrid mutual funds. In balanced mutual funds the money of the retail investor is invested in various asset classes like stocks, bonds and money market instruments. These types of mutual funds help investors to yield optimal returns over the time.
Protection from inflation
Ideal for new investors
Risk Reduction
Portfolio Diversification
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HDFC Balanced Advantage Fund Direct Plan Growth Option▲ 22.22%AUM ₹96536 Cr •
Expense 0.72%
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Bank of India Balanced Advantage Direct Growth▲ 15.08%AUM ₹137 Cr •
Expense 1.22%
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SBI Balanced Advantage Fund Direct Growth▲ 14.17%AUM ₹32941 Cr •
Expense 0.68%
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Baroda BNP Paribas Balanced Advantage Fund Direct Growth▲ 14.02%AUM ₹4187 Cr •
Expense 0.72%
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Invesco India Balanced Advantage Fund Direct Plan Growth▲ 13.84%AUM ₹889 Cr •
Expense 0.86%
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Axis Balanced Advantage Fund Direct Growth▲ 13.43%AUM ₹2577 Cr •
Expense 0.84%
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Nippon India Balanced Advantage Fund Direct Growth Plan▲ 13.05%AUM ₹8950 Cr •
Expense 0.56%
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ICICI Prudential Balanced Advantage Fund Direct Plan Growth▲ 13%AUM ₹62051 Cr •
Expense 0.84%
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Tata Balanced Advantage Fund Direct Growth▲ 12.89%AUM ₹10453 Cr •
Expense 0.34%
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Motilal Oswal Balance Advantage Fund Direct Plan Growth Option▲ 12.8%AUM ₹1316 Cr •
Expense 0.96%
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Edelweiss Balanced Advantage Fund Direct Plan Growth▲ 12.63%AUM ₹12690 Cr •
Expense 0.46%
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Sundaram Balanced Advantage Fund - Direct Plan - Growth Option▲ 12.58%AUM ₹1591 Cr •
Expense 0.56%
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NJ Balanced Advantage Fund Direct Growth▲ 12.35%AUM ₹4254 Cr •
Expense 0.62%
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Aditya Birla Sun Life Balanced Advantage Fund Direct Plan Growth Option▲ 12.33%AUM ₹7701 Cr •
Expense 0.67%
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HSBC Balanced Advantage Fund Direct Plan Growth Option▲ 12.28%AUM ₹1510 Cr •
Expense 0.77%
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Kotak Balanced Advantage Fund Direct Growth▲ 12.25%AUM ₹17206 Cr •
Expense 0.51%
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DSP Dynamic Asset Allocation Fund Direct Growth▲ 11.23%AUM ₹3259 Cr •
Expense 0.7%
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PGIM India Balanced Advantage Fund Direct Growth▲ 11.23%AUM ₹1112 Cr •
Expense 0.47%
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Shriram Balanced Advantage Fund Direct Growth▲ 11.12%AUM ₹59 Cr •
Expense 0.53%
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ITI Balanced Advantage Fund Direct Growth▲ 10.65%AUM ₹391 Cr •
Expense 0.63%
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Who Should Invest in Balanced Funds?
Investors With Moderate to Very-High Risk Tolerance
Balanced funds, also known as hybrid funds, invest in a mix of equities and fixed-income securities. This combination helps balance the risk and return, making these funds suitable for investors who are comfortable with 'Moderate' to 'Very High' risk but still seek growth potential.
Investors With a Medium-Term Horizon
Balanced funds can be a good choice for those with a medium-term investment horizon, typically between 3 to 5 years. The mix of asset classes in these funds provides a stable investment option while still allowing for capital appreciation over time.
Investors Seeking Diversification
Balanced funds are designed to offer diversification in a single investment by including both equity and debt instruments. If you're looking to diversify your portfolio without the need to manage multiple investments, balanced funds can be an efficient solution.
Why Should You Invest in Balanced Funds?
Risk Mitigation Through Asset Allocation
Balanced funds allocate investments across both equity and debt, helping to mitigate risk. In times of market volatility, the debt portion of the fund can provide stability, while the equity portion offers growth potential.
Steady Income with Growth
Balanced funds aim to provide regular income through dividends or interest from the debt portion while also offering the potential for capital appreciation through the equity portion. This makes them appealing to investors seeking both income and growth.
Flexibility in Asset Allocation
Fund managers of balanced funds have the flexibility to adjust the ratio of equity and debt based on market conditions. This active management can enhance returns and reduce risk, making balanced funds a dynamic investment choice.
Risks Involved With Investing in Balanced Funds
Market Risk in the Equity Portion
The equity portion of balanced funds is subject to market risk. If the stock market experiences a downturn, the value of the equity investments in the fund may decline, impacting the overall performance.
Interest Rate Risk in the Debt Portion
The debt portion of balanced funds is sensitive to changes in interest rates. If interest rates rise, the value of existing debt securities may fall, which can reduce the overall returns of the fund.
Potential for Lower Returns Compared to Pure Equity Funds
While balanced funds offer stability, they may not deliver the same level of returns as pure equity funds, especially in a bullish market. Investors seeking higher returns may need to consider whether the trade-off in risk is worth it.
Taxation Of Balanced Funds
Balanced funds are taxed based on the proportion of equity and debt in the fund. If the equity portion exceeds 65%, the fund is taxed as an equity-oriented fund; otherwise, it is taxed as a debt-oriented fund.
Equity-Oriented Balanced Funds
For funds with an equity allocation of more than 65%, short-term capital gains (for holdings less than 12 months) are taxed at 20%, while long-term capital gains (for holdings over 12 months) are taxed at 12.5% for gains above ₹1.25 lakh.
Debt-Oriented Balanced Funds
For funds with a debt allocation exceeding 35%, short-term capital gains are taxed at your applicable income tax rate, while long-term capital gains (for holdings over 3 years) are taxed at 20% with indexation benefits.
Frequently Asked Questions
A balanced fund is a type of mutual fund that invests in a mix of stocks (equities) and bonds (debt). This strategic allocation aims to provide investors with a balance of potential growth from equities and stability from debt, reducing overall investment risk.
Balanced funds typically appeal to investors seeking a middle ground between aggressive growth and conservative income generation. These funds are often suitable for individuals with a moderate to very-high risk tolerance.
Balanced funds have demonstrated the ability to manage downside risk effectively through diverse investment strategies. If you're seeking a long-term investment that offers more stability than a pure equity fund, balanced advantage funds could be a viable option.
Balanced mutual funds carry a moderate level of risk, as they invest in both equities and fixed-income securities. While they are less volatile than pure equity funds, they still expose investors to market fluctuations, though the risk is typically lower than that associated with investing solely in stocks.
Yes, balanced funds are well-suited for long-term investment goals. Their diversified approach helps to manage risk while still offering potential for growth, making them a good option for investors looking to achieve steady returns over an extended period.
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