Are you working hard to keep everything in your life BALANCED? I am sure, who does not want to lead a balanced life.. Staying balanced in the midst of your life is a true feat.
A well balanced life is very much essential for personal effectiveness, peace of mind and living well. We all would like to maintain a balance between professional and personal life. Both are equally important to lead a successful, happy and healthier life. We need to have a right and well-balanced diet to be healthy and fit.
Investing in Balanced Mutual Funds is not much different. Balanced funds are also known as Hybrid Mutual Funds. Personally I prefer investing in balanced funds to achieve my medium and long-term goals. I am a strong advocate of Balanced Funds. (Read : My Mutual Fund Portfolio)
Whether you are a new or an experienced investor, investing in balanced funds can be fruitful. They can give you Diversified Equity funds like Returns but with a lower risk profile.
Last year in the month of June (2016), I had published an article on ‘ Best Balanced Mutual Fund Schemes ’. One year gone by, so let’s review the performance of these top performing balanced funds and let’s have a look at the new list. But, before that, let’s discuss on the basics of Balanced Funds.
What are Balanced (or) Hybrid Mutual Funds?
Mutual funds are broadly classified as either Equity or Debt,based on where the funds are invested.
- Equity funds primarily invest in stocks/shares.
- Debt funds primarily invest in Bonds, Government securities and Fixed interest bearing instruments. (Related reading : ‘Types of Debt Funds‘)
- BALANCED FUNDS invest in both equity and debt instruments.
What are different types of Balanced Funds?
Balanced mutual funds can be Equity oriented or Debt oriented hybrid plans.
If the average equity exposure of a balanced fund is more than 60% and the remaining 40% is in debt products then it is treated as an Equity Oriented Balanced Fund. This means major portion of the fund’s assets are invested in equity (stocks).
If the average debt exposure is around 60% and equity is 40% then these funds are treated as Balanced funds – Debt oriented. (These proportions can vary among different balanced fund schemes).
As per my last review on Top performing Balanced Funds, I had earlier suggested below schemes ;
- HDFC Balanced Fund
- TATA Balanced Fund
- ICICI Prudential Balanced Fund
- Birla Sun life Balanced ’95 Fund
- SBI Magnum Balanced Fund
- HDFC Children’s Gift Fund
As HDFC Children’s Gift Fund may not be suitable to everyone, so I have included a regular balanced fund in its place, which is L&T Prudence. (Last year, I have suggested to keep an eye on L&T Prudence’s performance.)
If you have invested in any of the above Funds, you may continue with your investments in them.
Top Performing & Best Balanced Mutual Fund Schemes & Returns Analysis
Below are the top and consistent performances under Balanced (Equity oriented) category ;
- There are around 61 Balanced (Equity oriented) Schemes. The Category’s average returns have been around 12% for the last 5 years.
- HDFC Balanced fund has been one of the best consistent performer under ‘Hybrid-Equity’ fund category. The fund’s last ten year record is as good as some of the best pure Equity funds. This fund generally allocates 70% of its corpus to Equities and the remaining balance is invested in Debt Securities. The fund’s investment strategy has been aggressive when it comes to allocation of corpus to mid/small stocks, when compared to its peers. This fund has a very low portfolio turnover (Portfolio turnover is a measure of how frequently assets within a fund are bought and sold by the managers). The last 5 and 10 year returns are 19% and 16% respectively.
- Birla Sunlife’s Balanced Fund (’95) is one of the oldest available balanced funds and has also been a consistent performer. This fund has an allocation of around 71% (May 2017) of its corpus to Equities and around 19% has been invested in Debt oriented securities. Around 23% of its Equity allocation has been invested in Banking & Financial Services sector.
- L&T Prudence Fund, though relatively a new entrant in this category, it has been performing really well for the last few years or so. It has beaten its benchmark and peers by impressive margins over the last four years. The Fund’s risk grade is ‘below average’ and return grade is ‘above average’. It has an allocation of around 69% to Equities. The fund’s investment strategy has been a ‘multi-cap’ approach with slightly higher allocation to Mid/small cap stocks. Whereas, it does not take much risk with Debt securities and primarily allocates debt corpus to less risky bets like Sovereign Debt, Bonds & Treasury investments. We need to see how this fund performs in a bear market (as this fund has been launched in 2011 only).
- ICICI Prudential Balanced Fund has an Equity allocation of around 65% and around 28% of its corpus is invested in Debt securities. Its performance during the last 5 year period has been quite impressive.
- SBI Magnum Balanced Fund has been inconsistent until 2011 (with patches of bad and good performances). However, this fund has been performing well since 2011-12. This fund typically maintains a 75-25 equity-debt mix. The equity part is multi-cap, with 50% allocation to Large cap stocks and 50% allocation to mid/small cap stocks. In the Debt portion, about 50% is invested in G-Secs.
- TATA Balanced fund has been one of the star performers under Balanced Funds category. However, its performance has not been up to the mark for the last 1-2 years. The fund’s three and five year returns have beaten its benchmark by around 10% and its category by 5% points. But the margin of out-performance has narrowed in the last 1 -2 years. Its standard deviation has been slowly inching higher. Nevertheless, it is still one of the best consistent performers for the last 10 years or so. Its 10 year returns have been around 14%, next best to HDFC Balanced fund.
- Two more balanced funds to watch out for are Franklin India Balanced Fund & DSP Blackrock Balanced Fund. Let’s keep a track of their performances.
Best Equity Oriented Balanced Mutual Fund Schemes & Risk Ratios
Let’s have a look at the Risk ratios of these top performing & best Balanced Mutual Fund Schemes;
(Sorted based on overall ‘Fund Risk Grade’) (Source : Valueresearchonline.com)
In case, you have to pick a balanced fund out of these top performing balanced funds as per your requirements, you need to give importance to both returns and measures of volatility. You may analyze various ratios as given in the above image and select the one which is the best for you.
Ideally, the fund should have lower Standard Deviation, low Beta, high Alpha and so on..
Suggest you to kindly go through my article ‘how to pick right mutual fund scheme?‘ for the detailed explanation on various types of risk ratios.
The main benefits of investing in a balanced fund are;
- Diversification : The funds are invested in both equity and debt financial securities leading to diversification of investments.
- Asset Allocation & Re-balance : Balanced funds regularly re-balance the portfolio based on market conditions & asset allocation limits. An investor is, thus, saved the hassle of manually re-balancing the portfolio. But it is prudent not to remain invested in these funds till your reach your Financial Goal target year. You may have to switch to safer investment avenues as you reach your target year. (Related reading : ‘List of best Investment Options‘)
- Low volatility : Balanced funds are less risky compared to pure Equity funds. Equity portion will provide the capital appreciation through stock prices appreciation and dividend income. Whereas, Debt portion can provide stability through interest income and appreciation in Bond prices.
- Long Term Capital Gains : In terms of taxation, the balanced mutual funds that invest at least 65% in equity (Equity oriented) attract no tax liability on Long Term Capital Gains. The units of these funds should be held for more than 12 months. (Related Reading : ‘Capital Gains on Mutual Fund & Tax implications‘)
- You can consider balanced funds for your medium to long-term goals like Retirement Planning or for Kid’s Higher Education goal planning.
Have you invested in any of the balanced mutual fund schemes? Do you believe that one should include a balanced fund in his/her long term MF portfolio? Kindly share your views. Cheers!
(References : moneycontrol.com, valueresearchonline.com, morningstar.in & freefincal.com) (Post Published on : 19-June-2017)
This post was last modified on July 11, 2023 6:46 pm
View Comments
and another quick query -
which debt fund should be chosen for a lump-sum investment of 5 Lacs for starting an STP in Hdfc /ICICI balanced fund?
Dear UK,
You may consider liquid funds.
For ex : HDFC Liquid fund to HDFC Balanced fund (STP)
Thanks Sree.
I have invested 2.5 L in hdfc liquid fund and started STP to hdfc balance fund.
For balance 2.5L, i was thinking of parking 2.5L in hdfc medium terms opp. fund and buying hdfc balanced fund only on Dips. Have chosen this debt fund as the returns are better than liquid fund. Therefore just in case, the amount remains invested, the returns would be slightly better.
Thought of this as the markets are on very high levels and there could be a correction in the short term.
What would you suggest?
Dear UK,
STP is fine.
Kindly note that Debt funds too have some risks associated with them.
Do you plan to redeem some units of debt fund and invest in Balanced fund whenever such opportunity comes??
Yes, Sree.
That's what I plan otherwise will just remain invested.
Hello Sreekanth,
In Jan'15. I had invested 1.5 Lacs in lumpsum in ICICI Pru Equity Income Fund - Growth. This is a balanced fund which was lunched in Nov-2014.
After nearly 3 years of launch, if i look at its performance, it stands out among the laggards with just 9% annual return. Whereas, all goods funds in balanced category have given a return of over 15% and some of them even 25% also!
What could be the reason for such dismal performance from a reputed fund house ..and what would be your advise for me?
Should i hold this fund or switch over to a better one? Investment horizon is another minimum 5 years.
thanks...and looking forward to your suggestion.
Regards, UK
Dear UK,
There is no guarenteed that all schemes will perform well.
Each scheme has its own investment objective and strategy. Sometimes it works and sometimes it may not.
Also, different funds are managed by different fund managers.
Do note that its advisable to stick to schemes with long-track records, which have performed consistently well across different market cycles. ICICI Equity income fund belongs to Equity oriented balanced funds, this is relatively new fund. Given a choice, I would pick a consistent performer like HDFC balanced fund than a new fund.
You may switch to HDFC Balanced fund.
hello shrikant
my investment
axis long term (elss) 2.5 k
franklin taxshield (elss) 2.5 k
idfc classic equity fund (multicap) 5 k
franklin bluechip (large cap) 5k
investment period - 5 years
pls suggest any more mutual fund should be added or modify existing funds.
can u suggest any other instruments to be added in my portfolio.
thanks in advance
Dear Bhavin,
For a 5 year investment horizon, equity oriented balanced funds can be an ideal choice.
Except IDFC fund, the other three funds are fine.
Kindly read :
How to pick right mutual fund schemes?
MF portfolio overlap analysis tools
Best Equity funds
Hi, thank you for guiding us.
My query is wrt to the taking additional advantage over 'just parking money in maxgain home account (to get 8.7 % interest)'.
I do get 18000 income for my flat on which I do pay 39K EMI, instead of parking this amount in maxgain I wanted invest it MF's through SIP to avail additional advantage ( I knew the risk in MF's)
I plat to invest this 18K in 2 or 3 funds (at leat 5 years), 10k in balanced rest 8k in multicap or as you suggested.
please suggest me good funds.
just to give you more info..I am carrying SIPs of 13k for my long term goals (since 2 years). They are rel.regular savings, kotak select focus, sbi multicap rel. small cap etc.,
Please suggest me the right funds may be from existing or new funds. I hope your suggestions will help me to repay my home loan.
regards
ram.
Dear Ram,
You may pick couple of Balanced funds Ex : HDFC Balanced fund / Birla Balanced '95 fund.
Hi Sreekanth,
I am a new entrant to Mutual fund investments planning to invest in medium & long term. With the P/E ratio approximately at 26, is it right time for me to invest in SIPs (or) should I wait for it to reduce?
In general what does P/E ratio signify?
Dear Arun,
It is calculated by dividing the current market price of the stock by its earning per share (EPS). PE ratio can be calculated for a stock as well as say for an Index.
I assume you are referring to index EP at 26. So, how to calculate this PE?
For ex : Nifty PE ratio measures the average PE ratio of the Nifty 50 companies covered by the Nifty Index.
If you are investing for long term and that too through a SIP (regular intervals), you may start investing and do not wait to TIME the markets!
Thanks for the clarification, Sreekanth!!
Hello sir
My portfolio
My monthly salary is 55k and my age is 27
Currently working in state govt .
I have taken hdfc term plan
Investing 6k per month in PPF(tax saving plus wealth creation)
2k sip in HDFC balanced fund for 20 yrs
2K sip in sbi bluechip fund for 15 yrs
2k sip in axis long term equity (tax saving)
1k hdfc mid cap fund for wealth creation .
10K per month in RD for emergency fund .
Sir i want u to review my investment profile .
I will top up 1K in all this mf after 2 years
Dear Abhishek,
You may kindly continue with your investments in these funds.
Once you accumulate the required emergency fund, you may divert the savings to mutual funds (instead of RD).
Do you have health insurance cover? Is your term plan covers permanent Disability risk?
Thank you sir for quick response
Sir i have taken hdfc click to protect plan for 1 crore
Medical facilities are provided by board
Dear Abhishek ..Kindly go through these articles :
Importance of Personal Accident insurance plan.
HDFC Click2protect - review
Sir my term plan is hdfc click to protect plus (life option ).
Should i take personal accident insurance separetly .
Dear Abhishek ..Yes, it is advisable..you may kindly go through the suggested article..
Sir
my spouse and I are in secured job. we are investing Rs 51000 in following SIPs. My horizon is 12+ years, aim is wealth creation with moderate to aggressive.
Large:
SBI blue chip 5k
FI Bluechip 4k
Mirae Opportunites fund 4k
Multi cap
I Pru Value discovery 4k
FI High grwoth companies 5k
Midcap
Mirae Emerging bluechip 4k
HDFC midcap opportunites 4k
Smallcap
DSPBR Microcap 4k
Balanced
HDFC Balanced 8k
Debt and arbitrage
I Pru Liquid 3k
I pru equity arbitrage 2k
Quantum Dynamic Bond fund 4k
In addition we have compulsory NPS (Rs 14000 each per month) and also invest in PPF of atleast 50k per annum each.
Kindly comment on selection of my funds as well as asset allocation
Dear Mr Mundra,
All the above listed funds are good ones. Only thing is may be, too many funds in your Equity fund portfolio.
Kindly read :
MF portfolio overlap analysis tools
How to pick right mutual fund schemes?
Hi Sreekanth, As you mentioned in other invest lumpsum when the market is relatively low, So, Do you recommend investing lumpsum amount in midcap or small cap mutual funds in current market situation or should i wait for some more time. I have a 1lakh in hand which i am planning to invest. I don't have any urgency. I am looking for long term 10 years. What is the best mode i can go for?
Thanks in advance
Madhu
Dear Madhu,
You may set-up STP (systematic transfer plan) and move the lump sum amount from a liquid fund to equity oriented funds.
Kindly do not wait to TIME the markets, as your investment is for long-term...
Hi Sree
I have around 2 Lakhs to invest for a period of 1 year.
Around 1 lakh i want to invest in a moderate risk option with higher returns.Liquidity : within 15 days is fine
Around 50000 i would like to invest in an arbitrage fund.(hoping they offer more returns than fixeddeposits and liquid funds)
Around 50000 i would like to invest in some aggressive investment options which can give me very high returns.
Please suggest me some good funds for each category.
If you have any other suggestion for investing this amount for a period of 6months to 1 year please suggest that too.
(For around 75% amount i'm ready to take moderate risk and remaining 25% can take high risk).
Dear Vishnu,
Investment option for 15 days????
Kindly read :
Arbitrage Funds - review
Types of Debt Funds
List of investment options
Hi Sree
I meant , if i want to withdraw the amount from these investments (without completing its tenure) then i can wait for 1 to 15 days to get it redeemed to my account .
Dear Vishnu,
Kindly note that we can't expect very high returns from debt funds and that with an investment time-frame of around 1 year.
Kindly go through earlier suggested articles.
You may consider Liquid funds, Ultra short term debt funds / arbitrage funds.
Hello Sreekanth.
I am having a bank FD of Rs. Nine Lakh earning 8% annual interest for a duration of 6 years. Interest income of Rs 6,000 comes to me monthly I come in 30 %tax bracket.
In order to avoid tax and to preserve the initial capital,I wish to go for a Balanced fund - Direct, Growth with monthly SWAP withdrawal @9%per annum which works out to a monthly withdrawal of Rs 6750. I can keep the fund for next 6 years or more
Do you think, I am doing the right thing. Do you think my initial capital is unlikely to erode and my SWAP will come from increase in NAV?.Should I opt for HDFC or ICICI or L&T or dividedmy portfolio equally among these three mutual funds
Regards
Vinod
Dear Vinod,
May I know if monthly/periodic withdrawal is your requirement or you just want to withdraw certain amount from equity fund??
If fixed period income is your requirement, considering your tax bracket, and if you can afford to take moderate risk - Setting up SWP from a Balanced fund is effective and makes sense.
Time-frame of 6 years is fine.
However, there is no guaranteed that capital erosion will not happen, as returns from MFs are not fixed.
"When you’re invested for the long term, your average return becomes much more stable over time and it’s less likely that you’ll lose money. Various studies show that as we lengthen our investment horizon, the average annual rate of return over that timeline becomes less variable."
Thanks Sreekanth for your valuable guidance. I am thinking of foreclosing my bank FD and investing Rs 9 Lakh in Balanced fund with SWP of Rs 6750 every month. My time horizon of holding the fund is above 6 years.
Can you kindly advise whether I Should I opt for HDFC balanced fund, or ICICI Prudential balanced or L&T prudential or alternately divide my portfolio equally among these three mutual funds
Dear Vinod..Given a choice, I will consider HDFC balanced fund.
Kindly read : How to pick right mutual fund scheme?