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Useful articles for your finance management by our team of experts

Best Balanced Mutual Funds

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Investors have the appetite to invest directly in equities or through diversified equity mutual fund schemes. But, the risk involved of investing in such instruments is higher and not safe for conservative investors. They are recommended to invest in balanced mutual fund schemes. Investing in this instrument will generate moderate returns in long term by appreciating capital invested.

Mutual investments

What are balanced mutual fund schemes?

Balanced mutual fund schemes as the name suggest invest into equities to create wealth in long term and debt instrument products to maintain stability. Investing in this product helps to achieve your goals safely. This product satisfies investors’ appetite for equity as well as doesn’t take you on a bumpy ride during volatile sessions of markets. There is cushion from investing in debt which creates minimum return for investors.

The asset allocation of balanced mutual fund schemes varies in each product offered by an asset management company. The ideal mix an investor should look for while investing in this product is at least 65% into equities and 35% into debt instruments. This information is given in Key Information Memorandum of particular schemes.

Now, we will discuss Top Balanced Funds to Invest in 2010:

Performance and risks of Top Balanced Mutual Funds:

You need to consider the scheme which gives consistent returns in long term. Don’t fall in the trap of schemes which are star performers just for a short period.

mutual fund schemes

Source: Morningstar Direct   -   Data as of June 30, 2010

While investing in these schemes an investor should not look at performance as the only criteria. You need to analyze risks involved which are given below for above discussed schemes:

Historical Risk Ratios 3 Years

Scheme NameStd Dev (%)Sharpe RatioBetaR-Squared
HDFC Prudence29.20.5133.8
Balanced28.40.6134.8
Birla Sun Life 9527.80.40.939.4
DSP BlackRock Balanced250.40.830.3
FT India Balanced23.50.20.834.9

Source: Morningstar Direct   -   Data as of June 30, 2010

To know more about the interpretation of these risks involved in mutual fund schemes please read, “5 Ways to Measure Mutual Fund Risk”.

Asset Allocation:

As discussed above, asset allocation is an important aspect which needs to be considered while investing for right mix considering risk ability of an investor and expected returns for set goals.

Below, given are asset allocations of the schemes (Data as of June 30, 2010):

Scheme NameEquityDebtCashMoney MarketsOthers
HDFC Prudence:74.61%23.23%2.16%--
Reliance Regular Savings – Balanced62.89%31.70%0.37%-5.04%
Birla Sun Life 9567.03%15.25%-14.07%2.39%
DSP BlackRock Balanced72.23%21.64%-4.44%1.02%
FT India Balanced57.28%27.50%5.15%-0.07%

Source: Morningstar Direct

Fund Size:

This gives you the information on asset under management for particular schemes. The more the fund size is conveyed as an attractive scheme among investors.

Scheme nameFund Size (in Rs Crore)
HDFC Prudence4113.5
Reliance Regular Savings – Balanced539.2
Birla Sun Life 95289.9
DSP BlackRock Balanced677.1
FT India Balanced278.3

*Data as of May 31, 2010

Top Mutual funds

Source: Morningstar Direct

You don’t need to follow a herd while investing in any scheme just by seeing the fund size. Better analyze the scheme on different parameters as discussed in this article before making a decision to invest.

Tax Implication:

Balanced mutual funds are treated as equity funds for tax purposes when the fund allocates at least 65% into equities on an annual average fund amount. To create wealth in the long term an investor should continue to be invested in balanced mutual fund. The taxes applicable will be NIL for long term capital gain whereas, if an investor invests for short term in this scheme will have to pay 15% short term capital gain tax and 3% education cess which will make total taxes payable to 15.45%.

Written for InvestmentYogi by Hiral Thanawala

For details on latest top mutual funds, please click here

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