Top 10 balanced mutual funds to invest in India in 2013

Top 10 balanced mutual funds to invest in India in 2013

Top 10 balanced mutual funds to invest in India in 2013

Some of the investors want to participate in the equity markets, but want to limit their risk and returns. One of the best investment plans for such investors is investing in balanced mutual funds. Balanced mutual funds aim to limit the downside of the investment and would try to protect capital from market risks.

What are balanced mutual funds and how does it work?

Mutual funds generally invest majority of the portion in the equity markets and would get exposed to market risks. However, balanced mutual funds would invest 60% to 70% of the investment amount in equities and balance of 30% to 40% in fixed income options like bonds, debentures, debt funds and other fixed income options. With its investment strategy, the amount invested in equities would provide growth in investment and amount invested in fixed income provide stable returns.

Let us see below example. A balanced mutual fund has invested 70% in equity markets and 30% in fixed income options which provides 9% returns (Investment amount Rs 100,000 – Split into Rs 70,000 in equity markets and Rs 30,000 in fixed income options)

Scenario – Bull run: : Equity markets has grown by 15% annual returns (stock market has given annualised returns of 15% in the last 10 years). Hence the amount invested by MF scheme in stock markets has increased from Rs 70,000 to Rs. 80,500 (15% increase). The amount invested in fixed income options is now Rs. 32,700 (with 9% returns). The total investment amount is now Rs 113,200 which earned 13% returns

Scenario-No major changes in market: Equity markets have raised only to some extent and your mutual fund investment has returned 9%. Hence the amount invested by MF scheme in equities has increased from Rs 70,000 to Rs 76,300 (9% increase). The amount invested in fixed income options is now Rs 32,700 (with 9% returns). The total investment amount is now Rs. 109,000 which earned 9% overall returns.

Scenario-Bear market: Stocks markets have fallen to the extent of 5% and mutual funds investment has fallen to the extent of 3%. Hence the amount invested by MF scheme in stock markets has fallen from Rs 70,000 to Rs. 67,900 (3% loss). The amount invested in fixed income options Rs 30,000 has provided returns of 9% and the value of investment has moved from Rs 30,000 to 32,700 (Rs 30,000 x 9% = Rs 2,700). The total investment amount is now Rs. 100,600 (Rs 67,900 + 32,700). Your investment has just grown with 0.6% annual returns.

If you observe you would not be a loser if you invest in balanced mutual funds in above 3 situations unless the markets are falling heavily.

Top 10 balanced mutual funds to invest in India in 2013

The below analysis is done based on the past returns, ranking and investment objectives.

Top 10 balanced mutual funds to invest in India in 2013

Conclusion: Investment in top balance mutual funds would suit best to investor who want to take limited risk, but want to get exposure to stock markets and want to benefit from the stock market returns. These are generally termed as moderate risk-moderate returns investments. You can invest such mutual funds through SIP which would help you to earn more returns.

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Suresh
Happy investing in Top 10 balanced mutual funds in India in 2013

2 comments

  • Anup

    Dear Suresh,

    First of all thank you for all your posts on the website. Brilliant work!

    I have set aside some money to invest in equity mutual funds. I must mention that I do not have any pressing near term goals and am investing just as an alternative to having the money in my bank account as Fixed Deposits. 

    For the risk that I can take now, I see three options:

    1. Invest this amount (as a lumpsum) in a hybrid/balanced equity fund. This would be my first investment in an equity mutual fund. 

    2. Invest this amount (as a lumpsum) in a debt fund. 

    3. Invest this amount (through an SIP) in a mutual fund (may not necessarily be a balanced equity fund, but some option given better returns).

    Can you please let me know which of these three is the better option? 

    Thank you very much.

    Kind regards,

    Anup 

     

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