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Target returns that are between equity & debt

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It has been proven that maintaining asset allocation based on one's risk appetite is one of the optimum ways of wealth creation in the long run. To maintain the asset allocation, the investor must continuously monitor his/her portfolio and rebalance whenever the asset allocation shifts, which can be due to differential performance of the debt and equity portfolios or fresh investments.


Balanced funds can help you to get an exposure in the equity market and at the same time cushion your portfolio with debt. These schemes are equity-oriented funds with the portfolio comprising of debt securities and equities. Assets in these funds are generally held in a predefined proportion of debt securities and equities, that is 65-70% in equities and the balance in debt.


In a typical balanced fund, the equity portion is managed like a diversified equity portfolio while the debt portion is usually managed like a short-term debt fund based on accrual strategy. However, certain balanced funds could also look at managing the debt more actively.


A balanced fund by design maintains its asset allocation and rebalances based on market conditions. For an example, let's take a balanced fund with 70% exposure to equity and 30% to debt. If the stock markets are down, the fund's equity exposure will drop to the extent of the fall, and the fund manager will then invest more in equity to maintain the 70% equity level. This way, the fund will buy more equity when the markets are down and hence optimize returns.


Similarly, in a rising market, if the equity allocation moves up to 80%, the fund manager will sell 10% of the equity portfolio and buy debt, thus automatically booking profits.


How does it compare with other funds?


Broadly, balanced funds target returns that are between equity and debt funds. Volatility in a balanced fund is less than that in a pure diversified equity fund but greater than that of a debt product.


Balanced funds tend to outperform equity funds in cycles when stock markets are volatile or bearish as they have a cushion of debt. When stock markets are in a secular bull phase, they will tend to underperform funds with 100% equity component.


However, for a long-term investor where the investment goes through various market cycles, balanced funds have the potential to outperform even equity funds and are a great tool to achieve long-term goals.


Due to the equity-oriented structure of a balanced fund, it qualifies for the same tax treatment as equity funds as they have more than 65% of their assets in equities, that is, short-term capital gains are taxed at 15%, while there is no dividend distribution tax and long-term capital gains tax.


Hence, for investors looking at long-term wealth creation either through SIP or otherwise, a balanced fund provides a great tool to create wealth. It is also a great investment option in volatile market conditions as it helps cushion the down side and gives reasonable upside of equity.

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

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Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
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      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
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    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
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      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

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