Categories: Mutual Funds

Top Balanced Mutual Funds – Benefits & analysis of past Returns

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. All doctors suggest us to eat a healthy balanced diet.

Investing in Balanced Mutual Funds is not much different. Balanced funds are also known as Hybrid Mutual Funds. In this post let us understand more about types of balanced funds and investment returns from these funds (especially equity oriented 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.
  • 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 a Balanced Fund – Equity oriented. This means major portion of the fund’s assets are invested in equity.

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 funds).

Benefits of investing in Balanced Mutual Funds:

  • 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
  • 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.
  • Balanced funds have debt component in their asset allocation. Due to this they may suffer lesser losses during market downturns when compared to Equity funds.
  • These funds can be a better bet for first-time equity investors. These are also suitable for the investors who want to protect the downside during market downturns and want to benefit during market upswings. Remember that balanced funds may not out-perform the Equity funds during market upswings (Bull run).
  • Balanced funds can be a useful investment option to meet critical Financial Goals like Retirement Planning, Kid’s Higher Education etc.,

Top performing Equity Oriented Balanced Funds Above table provides the past performance of balanced funds (equity oriented). HDFC’s Children Gift Fund (Inv plan) tops the chart with annualized returns of around 20% in 5 year category. Followed by HDFC Balanced fund with 18.5% returns. All these funds have generated returns of above 15% in the last 5 years.

Systematic Investment Plans (SIPs) Returns of Balanced Equity Oriented Funds

The above table gives us idea about the SIP returns. I have assumed the monthly SIP amount as Rs 1,000.

Again, HDFC’s Children Gift Fund (Inv plan) tops the table with annualized returns of around 22% in the last 5 years. One more observation we can make on some of the very old funds. Example – HDFC’ s Prudence fund which was launched way back in 1993. This fund has generated SIP returns of around 23.18% in the last 15 years. The same fund tops the list in 10 year category, with returns of 18.95%.

The above past returns prove that investors will benefit if they stay invested for long periods of time.

What are the average returns of Balanced funds category?

The Below table gives us overall idea about the average returns generated by all balanced funds as a category.

Capital Gains Taxation of Balanced Mutual Funds

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).

The interpretation of data can sometimes be very tricky. For a different set of time periods, balanced funds might have given lesser returns. If our expectations are reasonable then I am sure balanced funds will deliver. I believe returns of 10% and above from a balanced fund (equity oriented) is a bonus.

Everything in life..has to have balance. It applies to investments too. I am sure you agree with me. Do you hold any balanced mutual funds? Share your views..Cheers!

(All the above plans are indirect plans, returns  > 1 year are  annualized and are Growth plans. Kindly keep in mind, past performance is no guarantee of future results- Image courtesy of Jeroen van Oostrom at FreeDigitalPhotos.net)

This post was last modified on July 10, 2023 11:47 am

Sreekanth Reddy

Sreekanth is the Man behind ReLakhs.com. He is an Independent Certified Financial Planner (CFP), engaged in blogging & property consultancy for the last 14 years through his firm ReLakhs Financial Services . He is not associated with any Financial product / service provider. The main aim of his blog is to "help investors take informed financial decisions." "Please note that the views given in this Blog/Comments Section/Forum are clarifications meant for reference and guidance of the readers to explore further on the topics/queries raised and take informed decisions. The information provided, therefore, should not be viewed as financial, legal, accounting, tax or investment advice."

View Comments

  • Dear Sreekanth,

    I have gone through your articles and I am convinced with your analysis. What I would like to know is the following:-

    1. I am an NRI, and I have my funds for my rainy days and planned out a retirement as well. What I am trying to understand is with a monthly capacity of INR 15k, for a period of about 3 years, what are the best SIP available to invest.

    2. I can put 1k in 15 funds where I see the profit%. I understand the Alpha and Beta calculation benchmarks and all your terms used in analysis. Kindly advice on the SIP.
    3. Also, I would like to know any such SIP investment for a period of 25-30 yrs with monthly frequency where I can get about half million$ (about 3.3 cr). Please note the investment here is different and not to be considered from my mentioned amount.

    I would appreciate if you reply with a detailed email

    Regards,
    Ishaan

    • Dear Ishaan,
      1 - 3 years can be a very short investment period to invest in Equity oriented funds. Do you need these monies after 3 years?
      2 - Investments in 15 funds are not required. you can pick 3-4 funds based on your time-frame and financial goal(s). Too many funds may lead to Portfolio overlap.
      3 - Besides Returns, it also depends on your monthly quantum of investment. If your investment horizon is >25 years, you can surely consider investing in Mid-cap oriented funds.

  • Hello sir i m new in investment i want to invest in MF SIP basis but when i try to invest there are a lot of confusion to select funds.where to invest open/close ended, either in debt/equity/balanced, either in growth/divedent either in large cap/mid cap/large cap.
    little bit confusion on return % while surfing money control for ex. 34% is it given benefit of 34% or assurance of 34% return of my invested money.
    and how to select time period like in money control for XYZ fund its shows 1 year 42% for 3 year 31% and 5 year 24% then what time period should i have select.
    kindly guide me to select and invest in MF.
    finally how to invest though money control or same/ direct website/broker..does they charge anything
    might be my questions will be very foolish and basic but truth is i don't know anything about MF.
    waiting for your valuable response.

    • Dear Atul,
      Kindly note that the past returns may or may not be achieved in future.
      The brokerage or transaction charges are dependent on the investment platform you choose. There are online distribution platforms like fundsindia.com, which are free of charges for mutual fund investments. You can also invest directly by visiting respective mutual fund company website.
      For this, you have to first get your PAN KYC done.

      Firstly, let me know about your financial goal(s)? How long can you invest? You have to select financial products based on your goals and time-frame.

      Your questions are relevant and genuine.

  • Dear Sir,
    I suddenly found your blog and really appreciate your service. I am 40 years old. I want to invest in Mutual fund through SIP to fulfill my objective of acquire a corpus of Rs. 30 lacs after 15 years. How much should i invest through SIP monthly and what are the funds to be invested. I am ready to take moderate risk. Please suggest.

    • Dear Suman,
      Kindly use the calculators available (click here) to know the required amount of savings.
      If your investment time-frame is 15 years, you got to take risk, consider investing in three funds - a Balanced fund, one mid-cap fund and one diversified fund.
      Read my article on - Best Equity funds.

  • HI

    Iam new to mutual funds and planning to invest in the following funds

    iam looking to invest in SIP 6000 rupees each in below mentioned funds . iam planning for long term(15 years) .

    Since iam planning for long term let me know should i go for Axis ELSS fund or not ?
    Also please let me know if below mentioned funds have proper diversification?(Equity and debt)

    i selected following funds after going through past performance , rate of returns and investment strategy

    P/B P/E SD Sharpe ratio Beta Alpha
    Franklin india high growth companies fund (multi cap) 3.2 23.7 15.34 1.62 0.99 15.36
    Franklin india smaller companies fund (mid & small cap) 3.4 22.3 16.2 1.82 0.97 20.13
    Mirae asset emerging blue chip fund (mid & small cap) 3.42 23.43 15.34 1.88 0.91 19.24
    Axis long term equity fund(ELSS tax saving) 8.55 35.3 13.43 1.76 0.88 15.1

    Checked portfolio overlap for above mentioned funds and its below 20 % for all the funds

    After verifying the analysis total average mid &small cap investment % is 57 and Gaint &Large cap investment % 43 for the funds selected

    i selected Small&midcap because iam ready to take risk and since iam looking for long term investment i think i will get better returns (as per the previous 10/5 year returns)compared to Large cap funds

    In case of Axis long term equity fund fori selected this fund on basis of the following synopsis i got about this fund in Value research

    “The outstanding performance is mainly due to the steady increase
    in small- and mid-cap stocks in its portfolio, which was initially tilted
    towards large-cap stocks. Currently, the fund holds around 43 per cent
    mid- and small-cap stocks in its portfolio. The large presence of small and
    mid-cap stocks and such aggressive positioning make it a risky bet
    and suitable only for investors with a higher risk-taking ability”

    Hope i made my point clear to you .
    Please give your suggestions and if any mistakes in my invest plan

    Since my total Large cap exposure is 43 % approx , Mid & Small cap exposure is 57% approx should i go for one pure balanced fund also(i have in mind TATA balanced fund PLan A)

    Last but not least i read in many blogs experts like you are suggesting New investors to go for Balanced funds rather than Diversified equity funds . wat the reason behind that .

    Even a new investor if he/she spends some time researching about various funds in valuable sites like Value research online , CRISIL under standing risks and returns involved in Mid &small cap funds compared to balanced funds cango for mid &small cap fund investment if duration is longer(more than 10 years). what do you say ?

    Regards
    Siva

      • Dear Siva,
        I was busy on personal front and was away from work.
        Appreciate your analysis and efforts to identify right funds as per your goals/investment objectives.
        If every 'New investor' does a research like you then certainly can prefer investing in diversified/mid-cap funds for long-term.
        Kindly go ahead with your investments.

        • Hi Sreekanth

          Should i go for one more balanced fund as i mentioned above or selected funds are good enough ??

          i got my CAN number and ready to start investing . this is the last check i would like to do

          regards

          Siva

          • Dear Siva,
            I personally prefer investing in Balanced funds. If they match your investment objective, you may consider investing in HDFC balanced or TATA balanced fund.

          • Hi Sreekanth

            Thankyou for sharing your opinion .
            Personally i thought of giving some kind of equilibrium in low times by considering one balanced fund in the portfolio

            Thank you very much for your suggestion and i hope so many new investors like me will get overall picture about investing in mutual funds by going through this form

            regards
            Siva

          • Dear Siva,
            Yes, balanced funds give the much needed equilibrium to one's MF portfolio. Do remember that when we are investing for long-term, there are certain periods when Debt markets outperform the Equity markets, so balanced funds do outperform many of the Regular Equity diversified funds.

          • Dear Siva,
            I personally prefer investing in Balanced funds. If they match your investment objective, you may consider investing in HDFC balanced or TATA balanced fund.

  • hii, I'm new to SIP MUTUAL FUNDS AND ALL, i want to invest 5k per month in sip but dnt know in which sec or which sip should i take my age is 24yrs.plz suggest acc.

      • ok actually i am thinking to invest currently 5k only so bdfc balanc fund is appropriate or mid-cap fund nd which mid-cap fund is good to opt for?

        • Dear Ankur..you can divide 5k in to 4k in hdfc balanced fund and 1k in Franklin small cos fund.

  • Hi Sree,

    I am new to MF. My age is 28 yrs.. I am married...I want to invest around 3000 and 3000 separately in 2 MF for a period of 3 yrs and 5-10 yrs ...One for my sisters wedding and other for my children...Please let me know which fund will be the best.. i read your balanced fund page...but still confused....Any suggestion will be of great help..

    Thanks and regards,
    Subham Dutta

    • Dear Subham,
      3 year Goal - Check out Mutual funds MIP aggressive plans. Kindly read this article : Top MF MIPs.
      5-10 year Goal - Consider one balanced fund and one diversified equity. Ex- TATA Balanced fund & Franklin Primaplus

  • Hi Sir,

    I'm 27 years old. I'm new to the mutual fund investment area and I want to do for wealth creation in long term

    As of now, I could save 10k in my monthly salary. Out of which, I want to invest 6k in mutual fund in SIP way and rest(4K) in savings.

    I have chossen below funds to invest in SIP way.

    Large Cap:
    2K in ICIC Pru foccused Bluechip Fund(G)

    Mid Cap:
    2K in HDFC Mid cap opp fund(G)

    Balanced fund:
    2k in HDFC balanced fund(G)

    I have choosen the above plans. Can you please suggest if i selected are good fund? or any suggestion to get best returns or If you want to invest more money in the choosen funds ?

  • Dear Sree,

    First of all thanks for your good work.

    I am planning to SIP for the below around 10 years

    UTI-EQUITY FUND DIRECT GROWTH - 3000 p/m
    CANARA ROBECO EMERGING EQUITIES DIRECT GROWTH - 3000 p/m
    Franklin India High Growth Companies Fund - Direct-GROWTH-3000 p/m
    Tata balanced fund-3000 p/m

    Which balanced fund is good. Tata, ICICI, HDFC?

    What is your view on the above, thanks.

    take care
    g.rajesh

    • Dear Rajesh,
      Go ahead with the shortlisted funds.
      You may choose any of the three balanced funds. I have invested in TATA balanced fund.

  • hello sir,
    I am 20 year old college student currently doing graduation in commerce and chartered accountancy simultaneously. I stay out of home and hence receive monthly 'pocket money' to meet my various expenses. I manage to save around 1000 rupees per month which remains idle in my savings account .I want to start investing my money in various funds with the aim to gain practical knowledge of investing without particularly looking at gains and other benefits. I wants to invest on monthly basis for a period of 2 years to get a lumpsum return in end. kindly suggest where should I invest?

    • Dear Harsh,
      I believe that investing in a balanced fund or in a Monthly Income Fund makes sense. Balanced funds have high risk profile when compared to MIPs.
      Kindly read my article on Top MF MIP funds and then take a decision. Revert to me if you need any assitance.

  • I want to invest for saving tax while accumulating a corpus for child's future educational and some investment in property.I am willing to stay invested for long time with 60% amount and 40% for 5 to 3 years.

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