Best Balanced Funds to Invest

With the objective of generating income in the form of returns and appreciating the capital, balanced funds invest an equal proportion of their assets in bonds and stock instruments.

• Although conservative in nature, balanced funds yield returns that are higher than those offered by bond funds or the money market
• Balanced Funds are the type of funds that invest in both equity and debt shares of a company at a balanced ratio thereby reducing an investor’s risk
• Investments made in these funds also allow the fund manager to adjust the fund’s portfolio according to market conditions, thereby balancing the risk involved
• These funds carry lower risks than pure equity funds but their returns are not guaranteed

Also Read: What are Balanced Funds

Top 5 Balanced Funds to Invest

Depending upon their 1 year returns, here is a list of the best balanced mutual funds that you may choose from-

(Data as on 26 May 2020; Source: Value Research)

1. Axis Children’s Gift Fund

(Data as on 27 May 2020; Source: Value Research)

• Axis Children’s Gift Fund seeks to generate income by investing in debt and money market instruments along with long-term capital appreciation through investments in equity and equity-related instruments
• The scheme is an open-ended investment option for children with a lock-in period of 5 years or till the child attains the maturity, whichever is earlier
• The fund managers invest the fund’s assets in equities, which hold great potential for long term wealth creation
• Moreover, the investments in debt and money market assets offer relatively less volatility, thereby balancing the risk involved

2. LIC MF Children’s Gift Fund

(Data as on 27 May 2020; Source: Value Research)

• The scheme aims to provide long term growth of capital through a judicious mix of investments mainly in quality debt securities with a relatively low level of risk
• 85.2% of the fund’s total assets have been invested in equity assets and the remaining 14.8% have been invested in cash and cash equivalents
• The fund has a major portion of its investments in the financial sector, followed by FMCG and technology
• As an investor of LIC MF Children’s Gift Fund, you can expect gains from your investments that beat the inflation rate in a time period of 3 years or more

3. Franklin Pension Fund

(Data as on 27 May 2020; Source: Value Research)

• The fund seeks to generate steady returns along with tax savings through a portfolio of up to 40% investments in equity and the balance in fixed income instruments, in order to ensure relative stability and deliver superior returns
• The fund is a government notified pension plan offering tax benefits under Section 80C
• Going by the guidelines laid down by SEBI, the fund can invest up to 40% in equities and balance the rest by investing in fixed income investment options
• Franklin Pension fund aims to help investors build a retirement corpus and earn a steady income even after retirement with the help of convenient withdrawal options

4. ICICI Prudential Asset Allocator Fund of Fund

(Data as on 27 May 2020; Source: Value Research)

• The fund has an investment objective of generating capital appreciation primarily from a portfolio of debt, equity and gold schemes
• The scheme is considered suitable for investors who are looking forward to higher returns with long term goals such as asset allocation
• The fund managers follow diversified investment styles of the underlying schemes in the portfolio
• The investors of this fund must be ready to pool in their funds for a time period of a minimum of 5 years

5. Tata Young Citizens Fund

(Data as on 27 May 2020; Source: Value Research)

• The fund is an open-ended scheme existing as an investment option for children, with a lock-in period of 5 years or till the child attains maturity, whichever is earlier
• The Tata Young Citizens Fund seeks to generate long term capital growth for its investors
• The fund is considered suitable for investors who are planning for their children’s future needs over the long term
• The fund managers follow a balanced approach thereby enabling the investors to save for their children’s future needs by investing in a combination of debt and equity instruments

Advantages of Investing in Balanced Funds

• Re-balancing– In certain cases, equity markets are overvalued when compared to debt markets and vice versa. In such situations, the fund managers have the freedom to move between the two asset classes and balance the fund’s performance against the market fluctuations. However, this is a possibility only in the case of investments made in balanced mutual funds
• Risk Reduction– It must be noted that investments in equity markets are highly risky. In extreme situations, the market as a whole can even decline by huge magnitudes. On the other hand, the debt markets involve lesser risk since debt instruments tend to deliver fixed returns. In such cases, the share of investments made in debt can be increased in order to balance the fund’s performance and get away from the risk.
• Diversification of portfolio– Balanced mutual funds offer diversification in the form of a single mutual fund. The fund managers of balanced funds have the option of maintaining a diversified portfolio with investments in varied assets.  This enables the fund managers to benefit in terms of capital appreciation and reduce the burden of risk involvements.
• High returns– A strategic mix of investments in debt and equity securities makes balanced funds less vulnerable to market volatility. Equity investments of the fund help in the appreciation of capital, while debt components protect the investments from market volatility, while also extracting high returns.

How to Invest in Balanced Funds

You can invest in overnight funds through either of the following ways-

• Offline mode of investing– If you are not confident of your knowledge, you may choose to invest through a broker. However, investing in a fund through a broker will make you eligible for investments through regular plans that offer different returns and varied expenses in investment. If you wish to invest in the fund independently, you must visit the nearest branch of the AMC of your fund. Don’t forget to carry the following documents-
  • Identity Proof (Aadhar Card)
  • Canceled cheque
  • Passport size photos (around 4-5)
  • PAN Card
  • KYC documents (for KYC verification)
• Online mode of investing– If you do not wish to add on to your expense of commissions or brokerage, you may visit online investment platforms such as Paisabazaar.com wherein you can choose from and compare more than 1,700 funds- all in one place, instead of following the long procedure of visiting the website of each AMC and then choosing from them. Here, you can select the fund in which you want to invest, look at the details and compare similar schemes as well as use SIP Calculator or Lumpsum Calculator to estimate the future value of your investment

Frequently Asked Questions

Ques. Is it good to invest in balanced funds?

Ans. Yes, it is considered good to invest in balanced funds if your investment objectives meet the fund’s objectives. Balanced funds offer lesser risk in investments as the fund managers of these funds have the chance to switch between investments in equity and debt depending upon the fluctuations in the market.

Ques. Do balanced funds involve any risk?

Ans. All mutual funds are subject to market risks. However, balanced funds involve a lesser amount of risk since the risk brought in by equity investments is balanced by debt investments and vice versa.

Ques. Why should one invest in balanced funds?

Ans. One should consider investing in balanced funds for diversification in investments, tax efficiency, high returns and reduced risk of loss in the investments, along with the option of re-balancing the investments.

Ques. Who should invest in balanced funds?

Ans. Mostly, new investors who are conservative in nature and do not wish to expose themselves to market risks may consider investing in balanced funds. Moreover, investors who are planning on an early retirement along with the motive of recording a reasonable growth of investments should invest in balanced funds.