Balanced Mutual Funds are equity oriented hybrid mutual fund schemes. Hybrid mutual funds invest in multiple asset classes like equities and fixed income instruments. Balanced mutual Funds have at least 65% asset allocation in equity or equity related securities and the remaining portion in fixed income instruments. Balanced mutual funds have a moderate risk profile compared to stocks or equity mutual funds due to the holding of fixed income (or debt) instruments which as an asset class is subject to less price volatility compared to equities.
Since equities comprise more than 65% of the asset allocation of balanced mutual funds, these funds can generate good returns in the long term. The debt allocation of balanced funds takes care to moderate the downside risks when the markets are volatile. Balanced fund managers maintain equity allocation above 65% and debt allocation to 35%, but they can change asset allocation based on their outlook for relative valuations of these two asset classes. If fund manager thinks that equity valuations are on higher side, they can reduce exposure to equities and increase allocation to debt. Likewise, if fund manager thinks that, equities are cheap then they can increase allocation to equities and reduce debt exposure correspondingly.
These active asset allocations help balanced funds generate superior risk adjusted returns, with lower volatility. Please check which are the top performing balanced funds
Balanced funds are good long term investment options for investors with moderately high risk profiles. These funds are also good investment options for new investors as well as those who are retired and looking for stable and regular return from their investments.
If your investment objective is capital appreciation over long term, then you can choose Growth Option in Balanced Funds. However, investors looking for regular income can opt for Dividend payout option. Investors should note that, dividends are paid out of the profits made by the fund and it is at the sole discretion of the fund manager. Therefore, the dividends, both in terms of the pay-out rate and the frequency of payment are not assured by any mutual fund scheme.
Please check the details of top dividend paying balanced mutual funds
Balanced funds enjoy a major tax advantage compared to many other investment products. Though Balanced Funds may have up to 35% allocation in debt instruments, they are taxed as equity funds. Long term capital gains (units held for a period of more than 1 year) are tax free. Dividends paid by balanced mutual funds are also tax free.