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

  • Hi Sreekanth,
    I am new to investing.
    I want to invest SIP monthly 2k .
    I am considering Rs1000 in HDFC Balanced fund or HDFC children gift fund for 5years. Please suggest any one.
    Also want to invest another RS1000 in icici prudential blue chip fund for 10 years.

    Please advice .

    • Dear Subashini,
      Go ahead with HDFC Balanced fund (in fact either of them are fine).
      ICICI Focused fund is also good one.

  • Hey srikanth , I am 27 years old, and have 2500 saved up. which mutual fund should i invest in for biggest returns in a 5 year plan? any suggestions would be appreciated. Thanks

  • Dear Sreekanth,
    As discussed with you earlier, I have started my SIP in MF thru Large, Mid-cap and Small funds.
    Now, I would like to invest in safer avenues.
    Instead of investing in Fixed Deposit, I was earlier planning to invest in Birla Sun Life MIP Wealth 25.
    But, felt to avoid the taxation of the same as LTCG, am considering the option of investing in Balanced Funds.
    (1) Are Balanced Funds a good option for my purpose?
    (2) Also, considering I am 23, which option would you suggest me - Equity Oriented, Debt Aggressive, Debt Conservative with a somewhat secured return as per past performances
    (3) Should a lumpsum investment of an amount, say Rs 5,000/10,000 be done in one shot or an SIP is recommended for the same?
    Please guide.

    • Dear Sanchit,
      If you are planning for long-term, invest in balanced funds. Considering your age, you can accumulate decent wealth by taking risks now and by investing as much as possible in equity MFs. Consider SIPs.

  • Hi Sreekanth,

    I am asking on behalf of my parents who are retiring now. They have a retirement corpus of around 15 lakhs and monthly income of around seven thousand from post office monthly income scheme. They are very risk averse. However, I want them to invest a part of their retirement corpus in some balanced mutual fund as this is still the early stage of retirement. Please suggest some suitable equity oriented as well as debt oriented balanced mutual funds.
    Is this the right approach? Please let me know if there are any other suitable options for investment. Both of them have some form of health insurance.

    • Dear Sowmya,
      They are just retiring now..so I endorse your views on investing a portion of their retirement corpus in mutual funds.
      You can surely consider balanced funds, besides this check the monthly income plans offered by mutual funds. MIPs are Hybrid-Debt oriented schemes.
      But let them understand the risks associated with balanced funds & MIPs. (Read my article on - Top MIP Mutual funds).
      Do they have health insurance cover?

  • Hi
    I want to invest in NPS.Please let me know the process of investing it through sbi.which one is the best fund manager for NPS?

  • I have just retired at age 60, I have 16 lac to invest for regular monthly/quarterly income. which balance fund or investment will be best for me. risk should not be high..

    • Dear Subimal,
      Suggest you not to invest the entire corpus in one asset category. Invest in FD / Post office Monthly Income Scheme / Post office Sr Citizen scheme. But, you may have to take little bit of risk to get decent portfolio returns, so that it beats the inflation rate.
      Also, consider investing some portion in Monthly Income Plans of Mutual Funds to beat inflation rate. Kindly read my article - "Top Monthly Income Plans by Mutual Funds".

  • Dear Shreekant,
    I am 24 year old and fairly new to the investment world. I wanna invest up to 5000 in SIP. Preferably split into two or more funds.
    Can you suggest a way ahead?
    Which funds to invest on and with what kind of split to go ahead?
    I am looking for a 5 yr investment plan as of now.

      • Dear Sreekanth,
        Thanks a lot for your advice.
        But if i have to choose between Tata Balanced Find, Hdfc Balanced fund and Icici Balanced fund then which two should i choose?
        Or should i divide my investment in all three?
        Kindly suggest..

  • Hi Sreekanth,

    Very informative site.

    We are planning to invest in Mutual Funds (both in lump sum and in SIP). We are looking out for tax benefit and also long term investment for around at least 10 years.

    Currently we have shortlisted SBI Magnum Tax Gain Scheme Direct Growth Plan, Reliance Tax Saver. Now thinking of HDFC Children Gift Fund as well.

    Need your advise on these -
    1. Are these goods plans to invest.
    2. Which plans should be selected for SIP and lumpsum.
    3. Are there any other good plans other than this. Please advise.

    Thanks in advance.

    Regards,
    Shruthi

    • Dear Shruthi,
      My picks would be (ELSS - Tax saver);
      Franklin Taxshield / ICICI Tax plan / Axis long-term equity. Kindly go through this article - "Top ELSS Funds"
      Do note that HDFC Children Gift Investment plan Fund, is not a tax saver. But, its a good one.

  • Hi,

    I want to invest around 10k for 2-3 years in Diversified MF. I am not interested in tax benifit. Hence i have choosen the below plans. Can you please suggest if i selected are good? or any suggestion to get best returns.

    ICICI Pru Exp&Other Services-RP (G) - 2500 Rs
    Franklin High Growth Cos (G) - 2500 Rs
    UTI MNC Fund (G) - 2500 Rs
    Birla Sun Life India GenNext Fund(G) - 2500 Rs
    BNP Paribas Equity Fund (G) - 2500 Rs

    Thanks,

        • Dear Anil,
          You may consider below ones then;
          HDFC Balanced Fund
          TATA Balanced Fund

          • Hi Sreekanth,

            Is it wise to invest in SIP or lumpsum(for ex 30-40k one time) for the below? and if required can we withdraw after 3 years(I hope its locking period is 3 years.)

            HDFC Balanced Fund
            TATA Balanced Fund

            Thanks.

          • Dear Anil,
            SIPs are better. They don't have lock-in period. You may redeem anytime. Suggest you remain invested for atleast 3-5 years.

  • Hello,
    I want to start a portfolio with 30 Thousands.
    And there after every month 3 thousand would like to invest.
    Please suggest the stocks name (from large cap, mid cap & small cap).

    Regards
    Aakash Jha
    09429109881

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Sreekanth Reddy

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