Balanced funds are the hybrid funds that invest in both equity and debt instruments. As this investment scheme offers diversified option of parking their money it offers higher and balanced returns. Though it is a diversified mutual fund to parks its major portfolio that is about 40 to 60% of its portfolio in the equity instruments, hence it is known as equity-oriented funds with lower risks and better returns. Investor should remember that the prices of the equity funds depend on the NAV or the Net Asset Value of the fund. This is the best investment type that is of lower risks with the gain of good returns. These schemes are good options for the investors who looks for safety, income, and sound capital from their parked money. As they are low risk investment option, investor can park their income to profit better returns than the other debt or equity funds. For the equity-based funds they are taxed about 15% over the corpus as short-term capital gain tax and 10% tax for the long-term capital gain tax. On the other hand, for debt-oriented funds 20% of tax is applied. Balanced finds have good features and benefits, though the hybrid funds have the facility of fund diversification between the equity or the between the debt funds while changing the funds, there is a drawback of high tax implication on the portfolio, but in that case balanced funds have minimal tax applied and offers other tax benefits. Also, with the option of diversification the fund manager can act smartly during the risk of any interest rate change or some other fluctuations, at that instance the fund manager can switch into any of the investment instruments.
Benefits of Balanced Funds:
- Tax Benefits
- Less Risks
- Option of diversification of investment portfolio
- Good returns
There are different types of hybrid funds, but balanced hybrid funds are unique in offering tax benefits, security, lesser risks with medium capital approach and the option of fund diversification makes it special among the other investment funds.