In a Balanced Fund, the asset manager has the flexibility to invest in a combination of stocks and bonds.
• Exposure to stock aims in generating long-term growth of capital.
• Presence of bond cushions the volatility.
From the taxation perspective:
Capital gain in mutual fund is the profit that results from selling mutual fund units. Capital gain tax rate differs according to the type of fund. The table below briefs you about the capital gain tax rates on different types of mutual fund investments for an Indian resident.
Balanced fund with debt exposure limited to 35% is subject to equity taxation. This makes balanced fund more lucrative.
Another fascinating feature in this type of fund is that it rebalances its portfolio automatically. For example, if the asset manager of a balance fund allocates 65% in equity and 35% in debt for all times. In case of rising markets the equity allocation rises to 70% naturally. This automatically makes the asset manager sell stocks and buy bonds to maintain 65:35 levels.
However, you might still be wondering how well balanced funds would perform in the long run.
The chart below compares the performance of Thefundoo's equity oriented Balanced Bund category to Large Cap Equity category.
ThefundooBalanced Fund (equity oriented) category has managed to outperform the Equity Large Cap funds category by over 110 bps over a 5-year period, that too by taking less risk.
Birla Sunlife '95 Fund – A 20-Year Legacy
In the equity oriented balanced fund category, the 20-year veteran Birla Sunlife '95 fund stands out well because of its consistent performance. Check more details about the fund below:
The above chart explains the growth of Rs.10,000 in the Birla Sunlife '95 fund, in balance fund category and in Nifty over a five-year period.
Birla Sunlife '95 fund has consistently outpaced its category average and Nifty. It has also topped in the ranking board not only on the basis of returns but also on the basis of risk-adjusted return.
Portfolio Construction:
Birla Sunlife '95 fund invests in a mix of equities, bonds, and money market instruments. This fund has the flexibility to maintain equity exposure between 50% and 75%. However, in the last five years the fund has maintained 70% exposure in equity and the rest in bonds and cash.
The chart below shows the asset allocation in different time periods.
Equity for Growth
The fund boasts of an impressive long-term record. It benefits from Mahesh Patil's investment strategy of picking stocks based on the bottom up approach and uses thetop down approach for sector allocation.
In terms of sector allocation, as on 31st March 2015, the fund manager has given highest weightage to financial services, which is 36% of the total equity portfolio. Other sectors such as IT, automobile, and consumer products together hold 22% weight.
The fund is widely diversified by owning 71 different stocks across all market caps. HDFC bank ltd, ICICI Bank Ltd, Reliance industries, Axis Bank Ltd, and L&T are the top 5 holdings and togetherhold 21% of the equity portfolio.
Debt for Safety:
In debt portfolio, heightened exposure to corporate debentures offers attractive yields. The fund's current YTM is 8.68% and its modified duration is 3.98 years. This significantly helps the portfolio reap benefits from falling interest rates.
Attribution Analysis:
Allocating sectors in the right proportion and picking good stocks are the major skills of a fund manager. These skills help a fund in generating alpha (returns more than index returns). The attribution analysis segregates the alpha of a fund based on the fund manager's decision on sector allocation and stock selection.
From the above, it is evident that the fund manager's decision on stock selection and sector allocation has rewarded the fund well.
Key Take Away
Equity market might witness volatility in the short-term because of disappointing corporate earnings, possible US interest rate hike, and other global tensions. On the other hand, bond prices are expected to increase further because of disinflation, which triggers further interest rate cuts. This helps Birla Sunlife '95 fund in performing well by rebalancing its portfolio dynamically on every rise and fall in the market.
Having such a consistent track record, Birla Sunlife '95 is a good bet for the investors.
Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015
1.ICICI Prudential Tax Plan
2.Reliance Tax Saver (ELSS) Fund
3.HDFC TaxSaver
4.DSP BlackRock Tax Saver Fund
5.Religare Tax Plan
6.Franklin India TaxShield
7.Canara Robeco Equity Tax Saver
8.IDFC Tax Advantage (ELSS) Fund
9.Axis Tax Saver Fund
10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
Invest in Tax Saver Mutual Funds Online -
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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