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Balanced Fund

A balanced fund is an investment fund which invests in both equity and debt instruments. They are also known as equity-oriented hybrid funds. The purpose of the fund is to balance the risk-reward ratio and ensure a healthy return for the investor.

Since it is a low-risk investment, it is a suitable option for first time investors. In short, when you want the best of both from the world of capital market investment, you can opt for a balanced fund. A typical balanced fund invests 50% to 70% of their portfolio in stocks and the remainder of their resources in bonds and other debt instruments. However, there is also a category of balanced funds defined by SEBI:

Types of Balanced FundsEquity %Debt %
Aggressive Hybrid Fund65-80%20-35%
Balanced Hybrid Fund40-60%40-60%
Conservative Hybrid Fund10-25%75-90%
Dynamic Asset Allocation Fund/Balanced Advantage FundNo LimitNo Limit
Multi-Asset Allocation FundAt least 10% in each asset class (equity, debt, gold)At least 10% in each asset class (equity, debt, gold)
Equity Savings Fund65% minimum10% minimum

Advantages of Balanced Mutual Fund

  • Safe Investment: A balanced funds are safe investment option in comparison to pure equity funds. Since a percentage of the fund is invested in debt instruments, the fund becomes less risky because debt instruments have fixed returns.
  • Tax Efficiency: Balanced funds allows a fund manager to move from equity to debt without incurring a tax liability for investors. As an individual investor, if you have to move the funds yourself, you will be subject to capital gains tax. Capital gains tax can be as high as 30% if you decide to move out of a debt fund within 3 years of purchase.
  • Rebalancing: With a balanced funds, the fund manager has the liberty to move between two asset classes. This is ideal during times of market volatility where a fund manager can easily switch among suitable classes.

Top Balanced Mutual Funds

Click here to know the list of Top Balanced Mutual Funds

Why Invest in Balanced Mutual Funds?

You should invest in Balanced Mutual Funds because Best Balanced Mutual Funds have given better risk-adjusted returns in the long run compared to equity returns. If you are a first time investor, a balanced mutual fund is a good investment option.

Documents Required for investing in a Balanced Mutual Funds

The documents required to purchase this fund are as follows:

  1. KCY - Proof of ID and Address
  2. Application Form
  3. PAN - Mandatory
  4. SIP/Auto Debit Form
  5. Bank Details/Statement

FAQs on Balanced Fund

Is a balanced fund a good investment?

Yes, if you are a first time investor, a balanced funds are suitable investment option.

Is it a right time to invest in balanced fund?

It is always a good time for investment. Everyone should have at least one balanced fund in their investment portfolio.

What are aggressive hybrid funds?

Aggressive hybrid funds are balanced funds which primarily invest 65% to 80% in equity instruments, while the remainder is invested in debt instruments.

What is a good balanced mutual fund?

A few good balanced funds have been mentioned above.

What is the difference between hybrid fund and balanced mutual fund?

There is no difference between a hybrid and balanced fund, both are the same.