Balanced mutual funds are emerging as one of the best investment options in India. A mutual funds which has a combination of owned stocks (equity funds) and own bonds (bond funds or fixed income funds) is termed as balanced mutual funds or hybrid funds. An investor always wishes is to multiply his investments with minimum risk. A balanced mutual fund helps them to achieve this by maintaining an optimum portfolio of allocation of both stocks and bonds. So if one asset class does not yield good returns the investors will not be overly affected. And it helps them to take timely decision on re-balancing their portfolio of balanced funds to ensure a balanced return.
There are different forms of mutual funds offered in India includes-equity hybrid funds that invest more into equity and less into debt and debt hybrid funds that invest more in debt and less in equity.
The top 5 balanced mutual funds in India are-
1) ICICI Prudential Balanced Fund
It offers a good return and has 18% CAGR (Compound Annual Growth Rate) over last 5 years.
2) HDFC Balanced Fund
One of the best mutual funds with a track record of 19% CAGR over the past 5 years.
3) TATA Balanced Fund
It has a very good stock portfolio and potential to perform well. Its average CAGR is16% over last 5 years and 23.5% over 3 years.
4) HDFC Prudence Fund
They have the highest assets under management and the CAGR amounts to 17% in last 5 years.
5) Birla Sun life 95 fund
It has the least CAGR with 15.1% during the last five years.
These help the investors in deciding on what percents to invest in equity and in debt so as to maintain the optimum portfolio allocation stable. The different variants of investments in these mutual funds can be through monthly income plans (MIPs), asset allocation funds and capital protection funds.
The main advantage of a balanced mutual fund is it helps the investors to earn good profits with reduced risk. Also the investors are benefited from paying tax as these funds follows the same tax laws of equity funds. The law states that if the capital gain generated is of short term the it falls under the tax rate at 15% and if has long-term capital gains it falls under the tax slab with 10% without indexation and 20% with indexation, where indexation is the process in which the buying price is adjusted with par to inflation. Therefore it helps in the reduction of capital gains by investing more in debt funds. The main disadvantage of balanced mutual fund is it sometimes make difficult to achieve market-level profit during the market decline period due to lower values of bonds.
