Balanced/Equity–Oriented Funds



Mutual funds are differentiated based on the class of securities they invest in. If the funds are invested in stocks, then the mutual fund is known as equity mutual fund, if the funds are invested in debt securities, they are called debt mutual funds. However, some mutual funds have a mix of both equity and debt, these funds are known as balanced funds or hybrid funds.

Balanced funds:
Balanced funds are a mix of equity and debt funds. They usually invest in the ratio of 65% in equity and 35% in debt. These funds are suitable for investors looking for a single choice that offers a wide range of securities within its scope. By investing in both equity and debt, these funds balance the risk and try to maximize returns.

Features of balanced funds:

Asset allocation:
Balanced or hybrid funds offer a mix of both debt and equity funds, thereby eliminating the need to have a separate fund in your portfolio. The fund manager has the required expertise to determine the optimum asset allocation, so investors need not go to great lengths of researching and analyzing the market.

The balanced funds are common equity-oriented funds, as they hold 65% in equity instruments. Owing to this factor the balanced funds are treated as equity funds for taxation purposes.

Differentiation factors:
The balanced fund has its share of risks as they predominantly invest in equities. However, this risk can be minimized by reducing the volatility in returns. A well-managed fund can boost yields and help diversify heavy portfolios while allowing for some room for capital growth.

Capitalization break-up:
Many investors are hesitant to invest in mid-cap and small-cap stocks as they are highly volatile. A balanced fund may have a mix of stocks of all market caps. However, it is better for an investor to choose the balanced fund with the right mix of stocks that fit their financial planning.

Who should invest?
The investors who are new to the securities market especially the equity market an invest in balanced funds. As balanced funds are a mix of both equity and debt and offer the best of both worlds. Before investing in balanced funds, the investor should have the requisite knowledge or enlist the services of a financial advisor to invest wisely in balanced funds.