Balance your funds by investing in balanced funds

Balanced funds or hybrid funds are a mix of equity and debt mutual funds. They keep their investment in the ratio of 60-40 where 60% of the amount is invested in stocks, and the balance 40% is invested debt instruments. Balanced funds maintain their formula of income generation and capital appreciation

Balance funds have their advantage and disadvantages:

The pros: The investor gets diversification in a single docket of mutual funds without the hassle of analysing and selecting each and every equity and debt fund.

Balanced funds are suitable for persons who are willing to invest a smaller portion of their income monthly.

A balanced fund allows the investor to make systematic withdrawals while maintaining suitable asset allocation.

The cons: They are not entirely risk-free, many investors are of the view that less volatility means risk-free. That is not the case; balanced funds also have their share of risks..

While holding only a specific class of funds, the investor can relocate some of the funds into other mutual funds as diversification for tax planning or wealth creation. However, in balanced funds, it is not possible as the same mutual fund owns both types of the asset class.

Choosing a balanced fund that suits the investor’s long-term goals is very important. When assessing the equity part, the investor should look for factors like the fund house, fund manager, asset value, constancy of portfolio, diversification, risk taken by the fund, asset size, and the historical returns. When assessing the debt funds, they should pay attention to the asset quality, fund manager’s qualification and sensitivity of the fund to rate changes.

Balanced funds are custom-made for new investors and those looking for relative stability for their savings. Hence balanced fund provides a good investment option wherein investing in one particular fund you can have exposure to equity as well debt market.

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