Balanced Mutual Fund
A balanced fund is a type of a mutual fund that invests money in average
performing stocks and bonds. The portfolio of the investor is a mixture of
stocks and bonds of various securities. A balance fund is also known as
"middle-of-the-road fund' because it produces moderate income and gives
moderate capital growth. The funds are invested in common stocks, bonds and
preferred stocks in order to seek high income and low risk of investment. These
funds are sometimes termed as asset allocation funds because it gives the
option of spreading your investment in various asset types by way of single
investment. These funds are selected by investors who prefer to invest in safe
and income generating securities.
It is a mutual fund
where the portfolio consists of a stock component, a bond component and a money
market component. It is a type of a hybrid fund which generally invests into
moderate and conservative securities. In spite of being a part of the asset
allocation family, the portfolio mix of balanced mutual funds dose not change
with changes in the stock market. Most of the funds have a fixed proportion of
stocks and bonds in the portfolio. However, some funds permit the fund managers
to increase the proportion of bonds in the portfolio. Bonds are safer than stocks.
They tend to protect the portfolio from being hit by drastic fluctuations in
the stock market. Therefore, your balanced fund investment is saved from
massive diminution of net asset value when the stock market crashes. Hence,
balanced mutual funds are considered much more conservative than equity mutual
funds. However, there are some funds that work on variable asset allocation
policy. This means that the asset mix keeps on changing with changes in the
stock market.
The performance of
balanced mutual funds is unconventional. These funds under perform when the
stock market is performing well, i.e., when the share prices go high. However,
they perform quite well when stocks are not doing good. Investors keep a check
on their investment and try to add more of bonds to the portfolio. This is
because bonds are less risky and less volatile than stocks. Investors want to
play safe so they optimize the portfolio by increasing the percentage of bonds
and decreasing the percentage of stocks. It is true that some balanced mutual
funds are restrictive in nature. This means that it only allows you to invest
funds in the Ind Stock market. On the other hand, there are other funds which
permit you to have investments in both traditional and international markets.
Some portfolios also include investment holding in precious metals and other
unconventional commodities.
Here
is a list of some of the best performing balanced mutual funds in India.
HDFC Prudence
DSPBR Balanced
HDFC Balanced
Tata Balanced
Birla Sun Life
Reliance Regular Savings Balanced
FT India Balanced
Canara Robeco Balanced
Principal Conservative Growth
HDFC Children's Gift-Inv
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| Rolling-Returns-BSL-Balanced-Fund |
Types of Balanced
Mutual Funds
A balanced mutual fund comes with many advantages of investment. This
type of investment caters to most of the requirement of an amateur investor.
Following are some of the benefits of holding funds in a balanced mutual fund.
Simplicity
A single balance fund investment provides investors with the option of investing in varied securities. It is a portfolio consisting of stock component, bond component and sometimes money market component. This type of mutual fund is simple and easy to manage.
A single balance fund investment provides investors with the option of investing in varied securities. It is a portfolio consisting of stock component, bond component and sometimes money market component. This type of mutual fund is simple and easy to manage.
Diversification of
Investment
An investment in balanced funds allows the investor to diversify his investment into stocks, bonds and money market instruments. It does not compel the investor to hold funds in a single type of market.
An investment in balanced funds allows the investor to diversify his investment into stocks, bonds and money market instruments. It does not compel the investor to hold funds in a single type of market.
Low risk
A balanced fund investment comes with an advantage of low risk. The securities comprising the portfolio is a blend of stocks and bonds which brings down the risk factor attached with this type of investment. The portfolio is less volatile in nature.
A balanced fund investment comes with an advantage of low risk. The securities comprising the portfolio is a blend of stocks and bonds which brings down the risk factor attached with this type of investment. The portfolio is less volatile in nature.
Steady Income
It is a steady income generating type of a mutual fund. It might not give you huge income, but yes, it will surely generate moderate income over a period of time. Balanced funds mostly focus on the value and growth factors of the securities rather than making huge profit overnight.
Minimum Capital
Requirement
A balance fund investment provides the investor with a flexibility of holding funds in the market with minimum or small investment. You don't need to invest large amount of money to have a balanced fund portfolio.
Disadvantages of
Balanced Funds
It is true that balanced funds come with many advantages of investment. However, there are various arguments that are against this type of investment. Following are some of the disadvantages of investing funds in a balanced mutual fund.
Cost of Investment
Investors have to keep themselves updated with the stock market every time. This is because fund managers charge the same fees for a 60:40 and 40:60 ratio of stocks and bonds. If you forget to change the ratio of investment with market changes, then you may loose out on a lot of income.
Investors have to keep themselves updated with the stock market every time. This is because fund managers charge the same fees for a 60:40 and 40:60 ratio of stocks and bonds. If you forget to change the ratio of investment with market changes, then you may loose out on a lot of income.
Long-term Investment
A balanced fund investment is good for investors who are seeking long-term benefits. It is not a good option for people who wish to make huge income in a short duration.
A balanced fund investment is good for investors who are seeking long-term benefits. It is not a good option for people who wish to make huge income in a short duration.
Low Income
This type of mutual fund investment produces low income. So it is not a feasible option for investors who want to make more money in less time.
This type of mutual fund investment produces low income. So it is not a feasible option for investors who want to make more money in less time.
Mutual fund investments are subject to market risks. Similarly balanced
mutual funds also suffer because of fluctuations in the stock market. However,
patience brings you fruitful results. One should select a balanced fund as a
part of the investment portfolio only if one has patience to wait long for
fruitful results as this type of investment produces low income in small time.