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Balanced funds come under that category of mutual funds which split the total investment into equity stock and debt securities. These are also known as hybrid funds. The funds in this category invest in a mix of equities and debts to achieve higher returns as against the risk of bearing losses. A balanced fund is a substantial long-term investment option having a mix of equity and debt instruments. Balanced mutual fund schemes are preferred by the individuals who step into the stock market to generate wealth but don't have the heart to bear volatility.
Four Reasons Why Balanced Funds are Called Safe Investment
1.Risk management: - They possess an inbuilt risk management quality which makes all the investors, especially the conservative ones, comfortable. The allocation of total assets on a proportionate basis helps in managing the risk of losing the invested capital.
2.Automatic rebalancing: - When you invest in a balanced Mutual Funds, the fund manager rebalances your portfolio on a regular basis as per the market ups and downs to reap maximum possible returns and ignore the anticipated losses.
3.All weather fruit: - The pure equity fund investors enjoy a handsome return at the time of the bull market. But, they also tend to face high losses during the market downswings. Whereas, a balanced fund investor earns decent returns against a lower risk parameter irrespective of the market moves.
4.Equity investment with a benefit of regular earning: - These schemes are best suited to those who are willing to invest in stock, but wish to make a periodical return alongside. The power of 65:35 ratio in the equity-oriented balanced funds enables the investors to enjoy a regular return from debt instruments and long-term growth from the equity securities.
Are Balanced Funds a Right Investment Plan For You?
a. Yes, if you are a first-time investor. The reason being is that, the prime intention of a first-time investor is to reap the fruits of equity investment while protecting the downside of his/her portfolio and hybrid funds provide the same.
b. Yes, if you are facing difficulties in making a choice between debt and equity. In such cases, most professionals advise that an investor should invest in a balanced mutual fund as it is the mix of both.
c. Yes, if you wish to benefit a healthy return with least risk factor. Under balanced schemes, the diversification of investment reduces the risk factors.
d. Yes, if you are a conservative investor and desire to earn decent growth with income stability. Being the last word vehicle for long-term growth, the balanced fund tends to provide prevention from market volatility and generate steady returns.
Thus, balanced mutual funds fit the best for you if you do not wish to take the excess risk in the pure equity market. Choose the best balanced mutual fund scheme as per your desire and risk portfolio through “MySIPonline”. They have the best schemes from the leading AMCs in the market, and will let your investment journey be simplified.