Balanced mutual funds are a type of income fund that invests in bonds and stocks equally. The primary objective of these funds is to generate income and achieve capital appreciation. These are managed by fund managers and are best suited for investors with a moderate risk appetite. Balanced mutual funds mostly attract investors who are looking for an early retirement.
What is a Balanced Mutual Fund?
Balanced funds are similar to income funds. However, these also comprise non-debt instruments such as common stock, preferred stock, real estate, etc. These funds often yield returns that are higher than those generated by bond funds or money market funds. Balanced
Funds take on a conservative approach and invest in a variety of high- and low-risk instruments. Some of the noteworthy features of balanced mutual funds are as follows:
- Balanced Funds invest in both equity and debt instruments using a balanced ratio to reduce an investor’s risk and offer portfolio diversification.
- Fund managers of balanced funds can adjust the fund’s portfolio as per the market conditions.
- Balanced Funds come with lower risks as compared to pure equity funds. However, the returns are not guaranteed.
Why Invest in Balanced Mutual Funds?
For new investors who are considering an investment in balanced mutual funds, here are some of the benefits to be availed:
- Re-balancing–Many a time, equity markets tend to be overvalued as compared to debt markets and vice versa. Hence, in case of balanced funds, fund managers can switch between the two asset classes and ensure a balance in the fund’s performance during market fluctuations.
- Risk Reduction–Equity investments often involve higher risk. When markets experience a downswing, there could be a decline in the value of stocks. On the other hand, debt markets pose lesser risk, as debt instruments often come with fixed returns. In such cases, the proportion of investments allocated to debt can be increased to balance the fund’s performance and contain the risk element.
- Portfolio Diversification – Balanced mutual funds provide the benefit of diversification within a single mutual fund. This is because the fund managers have an option to maintain and diversify the investments in varied assets. This provides the benefit of capital appreciation and reduces the level of risk involved.
- Higher returns–A strategic mix of debt and equity investments ensures that the balanced funds are comparatively less vulnerable to market fluctuations. Equity investments can offer capital appreciation while debt investments protect against market volatility. Both these combined can extract high returns depending on the fund manager’s expertise.
Best Balanced Funds to Invest in 2021
For investors who are looking for some of the best balanced mutual fund options, mentioned below are details of the top performing balanced funds:
L&T Balanced Advantage Fund
About the fund
This is an open-ended dynamic asset allocation fund that seeks to generate long-term capital appreciation via a diversified portfolio of equity and equity related securities. The fund also aims to generate reasonable returns through investment in debt and money market instruments. It also looks for arbitrage opportunities from cash and derivative instruments.
| Inception Date | February 7, 2011 |
| Benchmark Name | 50% – S&P BSE 200 TRI 50% – CRISIL Short Term Bond Fund Index |
| Fund Manager | Mr. Vihang Naik, Mr. Venugopal Manghat, Mr. Praveen Ayathan |
| Expense Ratio | 0.81% |
Asset Allocation
| Category | Percentage Allocation |
| Equity and equity related securities | 25.8% |
| Debt, money market and government securities | 26.2% |
| Cash | 48% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 24.23% | 11.64% | 9.01% | 9.83% | 12.38% |
Motilal Oswal Dynamic Fund
About the fund
This is an open-ended dynamic asset allocation fund. The fund aims to generate long-term capital appreciation through investments in equity and equity related instruments. Investments also include equity derivatives and debt instruments. The fund does not assure or guarantee the achievement of its objective or returns.
| Inception Date | September 27, 2016 |
| Benchmark Name | CRISIL Hybrid 50 + 50 – Moderate Index TRI |
| Fund Manager | Mr. Akash Singhania , Mr. Abhiroop Mukherjee |
| Expense Ratio | 1.20% |
Asset Allocation
| Category | Percentage Allocation |
| Equity and equity related securities | 37.2% |
| Debt, money market and government securities | 23.1% |
| Cash | 39.6% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | Since Inception |
| 26.39% | 10.88% | 7.23% | 9.61% |
Principal Balanced Advantage
About the fund
The main objective of the fund is to achieve long-term capital appreciation through systematic allocation of funds across equity, debt and money market instruments. The scheme allocates funds into equity assets based on the Price-Earnings Ratio (PE Ratio) levels. In case the markets turn expensive with regards to ‘Price to Earnings’ Ratio; the scheme reduces its allocation in equities and switches to cash future arbitrage or equity derivatives, debt and/or money market instruments.
| Inception Date | January 01, 2013 |
| Benchmark Name | Crisil Short Term Bond Fund Index |
| Fund Manager | Ravi Gopalakrishnan,Bekxy Kuriakose |
| Expense Ratio | 1.03% |
Asset Allocation
| Category | Percentage Allocation |
| Equity and equity related securities | 33.6% |
| Debt, money market and government securities | 13.7% |
| Cash | 52.8% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 21.64% | 8.11% | 7.07% | 8.47% | 10.01% |
Aditya Birla Sun Life Balanced Advantage Fund
About the fund
The main objective of the fund is to generate long-term capital growth and income distribution by ensuring relatively lower volatility. It primarily invests in a dynamically balanced portfolio of Equity & Equity linked investments combined with fixed-income securities.
| Inception Date | April 26, 2000 |
| Benchmark Name | CRISIL Hybrid 50+50 Moderate Total Return Index |
| Fund Manager | Mr. Vineet Maloo,Mr. Mohit Sharma |
| Expense Ratio | 0.81% |
Asset Allocation
| Category | Percentage Allocation |
| Equity and equity related securities | 33.6% |
| Debt, money market and government securities | 13.7% |
| Cash | 52.8% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 41.10% | 14.86% | 11.21% | 13.04% | 12.29% |
Edelweiss Balanced Advantage Fund
About the fund
This is an open-ended dynamic asset allocation fund that aims to provide equity like returns with lower uncertainty. The fund follows a process driven approach to switch between equity and debt investments depending on market conditions. The fund primarily invests in stocks of large-cap companies and high quality AAA rated bonds or similar debt instruments.
| Inception Date | August 20, 2009 |
| Benchmark Name | CRISIL Hybrid 50+50 – Moderate Index |
| Fund Manager | Bhavesh Jain, Bharat Lahoti, Gautam Kaul |
| Expense Ratio | 1.93% |
Asset Allocation
| Category | Percentage Allocation |
| Equity and equity related securities | 62.7% |
| Debt, money market and government securities | 18.6% |
| Cash | 18.7% |
Historical Returns of the Fund (annualised)
| 1-Year | 2-Year | 3-Year | 5-Year | Since Inception |
| 40% | 19.37% | 13.82% | 13.29% | 12.82% |
Conclusion
Before investing in a balanced mutual fund, investors must carefully assess personal investment objectives against the fund objectives. It is also important to assess the risk involved in the selected fund before finalising on an investment. Investors must make sure to compare among the available options and choose one which best suits personal requirements.
FAQs
- What are balanced funds in mutual funds?
A balanced mutual fund invests in stocks, bonds, and also money market instruments. It offers portfolio diversification within the same mutual fund and aims to achieve capital appreciation through the portfolio composition. These funds generally maintain a fixed mix of stocks and bonds and may adjust it in case of severe market volatility.
- Which are some of the best balanced mutual fund in India?
Some of the top performing balanced mutual funds in India are:
- L&T Balanced Advantage Fund
- Motilal Oswal Dynamic Fund
- Principal Balanced Advantage
- Aditya Birla Sun Life Balanced Advantage Fund
- Edelweiss Balanced Advantage Fund
- How to invest in balanced mutual funds?
Investors can easily invest in balanced mutual funds through the Fisdom app. Users can download this app on their smartphones and select a fund of their choice to invest in. The app offers seamless investment and KYC procedure that allows investors to begin their investment in minimal time.
- Are balanced mutual funds a good investment?
Balanced funds invest in both fixed income and equity securities. Therefore, these can be a good option for investors who are looking for a one-stop-shop portfolio diversification. Investors who prefer less volatility can invest in balanced funds, since these can provide income even during turbulent market conditions through debt investments. However, these do not guarantee returns at all times.
- Which is a better fund, equity or balanced fund?
Equity funds purely invest in equity and related instruments. Balanced funds, on the other hand, provide exposure to equity as well as debt instruments. These can therefore help investors maintain a balanced risk in the portfolio. A balanced fund can also redesign its portfolio to reduce concentration in equities and invest higher amounts in debt during market fluctuations.
