Growth fund and balance fund are 2 different schemes in Mutual fund sector. Both the schemes have different characteristic but are good investment option for the investors. In order to know which scheme one should choose it is necessary to understand both the scheme.
Both the Growth and Balance fund follows asset allocation approach i.e the fund manager who manages this funds invest in both equity and debt.
However in growth fund large proportion of investment is made in equity, while in balance fund normally 60% of investment is made in equity and rest 40% in debt sector. However this proportion can change which depends on market condition. As in growth large amount of money is invested in equity it becomes more risky than balance fund.
There is a myth among the people of “Higher the risk, Higher the return” although this myth is busted by balance fund as in past some balance fund have given better returns than growth fund and has been able to provide high return by taking moderate risk.
So the question arises is in which fund one should invest in???
In order to get the answer one should know what is his/her risk appetite, goals, time horizon and other factors that affects investment discussion of an individual.
If a person can take high risk and wants to achieve his goals in short term period it is advisable to invest in Growth fund as this fund mainly invest in equity it as the potential to provide good return within short period of time along with high risk. However is a person what to take moderate risk and wants to achieve his investment goals in a long run then in such case it is advisable to invest in balance fund.
Both growth and balance fund is a good investment option one can start an SIP in both the fund and can gain good return. Also it is advisable to stay invested for long period say 5-7 year in order to generate good return from the investment.
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