5 Compelling Reasons to Include Balanced funds in your Portfolio


Confused between equity or debt mutual funds? Why not, enjoy the benefits of both with a single balanced fund? Check out the reasons to include this one in your investment portfolio.

When it comes to investing in Mutual Funds, the options available for the average investor is mind boggling. From diversified funds to sector-based investments, the choices are wide and many.

If you are looking for a product that not only helps you in your long-term wealth creation but also provides you with the benefit of asset allocation, then balanced mutual funds are ideal for you.

What are Balanced Mutual funds?

Before you read the definition of this type of fund, let’s have a quick recap of the two major types of MFs. One is the equity-based fund. This fund contains a portfolio of shares and stocks of companies. The second one is the debt-based fund, which is made up of bonds.

Balanced funds are somewhere in the middle of these two types of funds. They usually have around 65% exposure to equities, and the rest is made up of bonds. However, no hard and fast rule determines the limit of shares in the portfolio of this fund. For instance, if equities are available at reasonable prices, the exposure can even increase up to 80%.

The asset allocation isn’t fixed. It’s dynamic, and this active management is what makes this fund deliver equity-like returns but with lower risk.

Here’s a look at why it makes sense to include these funds in your investment portfolio.

  • #1: Better Returns for Conservative Investors

Are you an investor who is scared of the risks associated with equities? Then the balanced fund provides a better long-term alternative. In fact, a look at the five-year returns of this type of funds shows that they are similar to the average returns of mid or large cap funds.

The bonus benefit: Lower Volatility

  • #2: Flexibility in Asset Allocation

Balanced mutual funds are equity-oriented mutual funds, but the fixed income exposure balances the volatility. Dynamic asset allocation makes this type of fund withstand the fluctuations of the market.

The overall asset allocation is based on an algorithm, which increases exposure to stocks when the market is favorable, and shares are available at low prices and switches to debt bonds when the market is in turmoil.

  • #3: Regular Dividend Payouts

If you’re looking for a regular income from your investments, then balanced mutual funds are ideal as they offer regular dividend payouts.

  • #4: Reduced Risk

This is one major factor why investors prefer balanced mutual funds. They have lower risks when compared to equity-oriented mutual funds.

  • #5: The Right Balance to your Portfolio

Any seasoned investor will agree that it isn’t safe to “Keep all your Eggs in one Basket”. A balanced fund diversifies your portfolio and gives you better returns in the long run.

In a Nutshell: What should you do?

If you want to gain equity like returns in the long term but without the volatility, then balanced funds work out perfectly for you. Include them in your investment portfolio. When it comes to choosing a balanced fund, pick one that shows consistency not only in returns but also in asset allocation.

A fund that makes sharp changes frequently doesn’t work out well in the long run. Ultimately, you need one that offers better returns at lower risk.

Breath-taking falls and evergreen forests- Driving to Hebri Udupi in the monsoons

Previous article

The rules to be observed by any employee in a support function

Next article