Are Balanced Funds What you Need to Make Your Investments Fly?

By | July 22, 2015

Depressed Businessman

What do skaters, gymnasts (in the air and water), dolphins, birds, dancer and spinning tops have in common? Balance is the key.

Wondering what all these things have in common with investments?

Here’s how balanced funds are all that you didn’t know you were looking for.

What are Balanced Funds?

Balanced funds are a good mix of sunshine and shade. Shade to save you from the sunburns and warm sunshine if you’re feeling a little chilly.

Put simply, the risks of both are evenly managed.

The balanced funds or hybrids funds boast of investments in both, equities and debt instruments. Diversification is the byword. ‘Don’t concentrate on one investment; look at the larger picture,’ is the credo.

A common asset allocation in a hybrid fund will be 70:30 between equity and debt, and this can be maintained. But keep a provision for some strains in the market.

What’s the gain?

Mean position: A hybrid fund help you float the equity investment.

The 30 per cent debt element in the funds cushions the vagaries of the stock market. Meaning less volatility and a sound sleep too.

Expertise at will: You have the luxury of having fund managers. They will park your money judiciously in equity and debt with due alacrity. So you are in safe hands. If the equity market is bad they will look the other way. Where? Obviously towards your bonds.

Tax cool: Equity allocation in hybrid funds will be more than 65%.That’s cool, isn’t it? The whole gamut of investment is considered as equity and there will be no long-term capital gain tax. That’s a bumper.

So the benefits are many and it is worth to take the plunge.

How does it perform?

Before that, let us also take a lowdown on the performance of the balanced funds in the immediate past. It’s worth a look.

If you look at the data of the past five years, the large cap funds gave 3.25% returns in five years compared to 6.55% for the balanced funds. It’s a head start of 3.3% for the hybrid funds. In the case of large and mid-cap funds, the balanced fund has an advantage of 1.1%. For multi-cap funds, and multi and small cap funds, the hybrid funds nose ahead by 1.97% and 1.18% respectively.

Points to Remember:

  • Study the long-term performance of a particular fund
  • Check the credentials of the fund manager
  • Check the risks taken by the fund manager in the long run.

Certain Hybrid Funds doing the Rounds:

  • HDFC Children’s Gift Fund — 5-year returns of 12.73%
  • HDFC Balance Fund — 5-year returns of 11.73%
  • Birla SL Fund — 5-year returns of 10.45%
  • Canara Rob Balance Scheme – 5-year returns of 9.29%
  • ICICI Prudential Balanced Fund – 5-year returns of 7.65%

Instead of zooming in on just one investment, the best way is to park money in safe balanced funds, both equity-based and debt-based. Spread the risk and you can feel like Free Willy, the whale, or Blu, the Blue Jay from Rio, who learnt to fly.


YOU MAY ALSO WANT TO: Make sure your investments are on the right wing – SIP Calculator

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