Best Balanced mutual funds to invest in 2020 India
Best Balanced / Hybrid mutual funds to invest in 2020
Balanced mutual funds invest in equity and debt. If you want to invest equity mutual funds, but want to take lower risk, investing in balanced fund or hybrid mutual funds could be the best bet. Even when markets are volatile, investing in balanced mutual funds is considered as best strategy, as it invests some part it debt segment / fixed income too. What are Balanced mutual funds and how to they work? Which are the top best balanced mutual funds to invest in 2020 in India? Who can invest in these hybrid or balanced funds?
What are balanced mutual funds and how do they work?
Balanced funds invest in a mixture of both debt and equity segments in specific ratios based on the investment objective of the fund. Balanced mutual funds are also called as hybrid funds. Generally, experts keep advising investors to diversify by investing in equity + debt segments. Since hybrid mutual funds invest in equity and debt segments, they provide risk-reward balance and help to maximize the mutual fund returns.
Based on the investment objective these funds are equity-oriented and take up about 40-60% of the fund’s portfolio and balance in debt segment. This way there capital appreciation as well as safety net against potential risks.
What are different types of balanced funds?
Balanced funds are classified into two categories:
1) Equity-oriented balanced mutual funds – These funds would invest a major portion in equity and derivatives. These are for aggressive investors. These funds majorly focus on capital appreciation rather than debt instruments which offer fixed income.
2) Debt-oriented balanced mutual funds – These funds would invest a major portion in debt segment. These are more for conservative investors. These funds would focus on generating consistent returns and are relatively lesser risk.
What are various categories of balanced mutual funds in India?
While balanced funds invest in equity and debt, there are several subcategories in balanced mutual funds. Let us go, through them to understand them better.
1) Aggressive hybrid fund – These funds would invest 65% to 80% in equity and balance in debt segment. These are for aggressive mutual fund investors.
2) Balanced hybrid fund – These funds would invest 40% to 60% in equity and balance in debt segment. These are perfect for investors who want to invest in equity, but looking for a safety net against potential risks.
3) Conservative hybrid fund – These funds would invest 10% to 25% in equity and balance in debt segment. These are for conservative investors who just want a flavor of hybrid funds.
4) Dynamic asset allocation or balanced advantage funds – These funds would in equity or debt without any restrictions. These are high risk, as there is no limit to invest in equity.
5) Multi asset allocation fund – These funds would invest at least 10% in each asset class like equity, debt and gold. This is perfect for those investors who want to invest in all these asset classes.
6) Equity savings fund – These funds would invest a minimum of 65% in equity, but can be hedged with derivatives and the balance in debt.
This article focuses only on balanced funds from aggressive and conservative category, as we have already covered others through separate articles.
How we filtered these Best Balanced mutual funds in India to invest in 2020?
Here are the list of parameters which we considered in short listing the Balanced mutual funds to invest in India.
1) We considered best performing balanced funds in the last 10 years, 5 years, 3 years and 1 year.
2) We have short listed hybrid mutual funds that performed well during various market cycles in the last 3-10 years.
3) Balanced funds that have Assets under Management as > Rs 100 Crores are considered.
4) We have segregated aggressive and conservative separately so that investors can choose based on their risk appetite. Aggressive funds are like high return investments in India.
Best Balanced mutual funds to invest in 2020 – Top Balanced funds in India
Here are the list of top balanced mutual funds invest in India for medium to long term in 2020. You can invest in the balanced mutual fund portfolio from your total portfolio of investments.
1) List of aggressive Balanced mutual fund portfolio
*returns are annualised
2) List of conservative balanced mutual fund portfolio
*returns are annualised
Some FAQs about Balanced mutual funds
Here are some of the FAQs about hybrid / balanced mutual funds.
1) Balanced mutual funds advantages and disadvantages
Here are the advantages:
i) It would re-balance your portfolio by investing higher or lower amounts in equity whenever markets are overvalued or undervalued.
ii) It provides diversification to your portfolio by investing in equity and debt.
iii) Since it invests in debt segment too, your equity risk is reduced.
iv) If one can invest in medium to long term, they can invest superior returns.
Here are some disadvantages of investing in some of the best balanced funds.
i) Like any other equity funds, these are not risk free as it still invests in equity.
2) How balanced mutual fund returns are taxed?
Income tax on balanced mutual funds returns are computed based on the type i.e. equity oriented or debt oriented:
a) Equity oriented balanced funds: Balanced funds which invests more than 65% are treated as equity funds and returns taxed accordingly. Investors need to pay 15% tax on short-term capital gains (STCG), i.e. the profits booked with one year of the equity-oriented balanced funds. If you hold these hybrid funds for more than 12 months and then sell, one need to pay 10% on long-term capital gains (LTCG) (if the gains exceed Rs 1 lakh a year).
b) Debt-oriented balanced funds: These hybrid funds are categorized under debt funds category for taxation purpose. If one holds more than 36 months, 10% LTCG tax is applicable or 20% with indexation benefit. If held lesser than 36 months, STCG are added to investor’s income and taxed based on individual tax slab.
In simple terms, equity-oriented balanced funds are tax efficient compared to debt oriented balanced funds.
3) Are balanced mutual funds a good investment?
Balanced funds invests in equity and debt options. Hence, these provide advantage of investing over equity funds as these are relatively safer compared to equity funds. If you are moderate risk to high risk taker, investing in some of the best balanced mutual funds can help you to get higher returns.
4) What is the difference between hybrid fund and balanced fund?
Many investors have a question about hybrid fund vs balanced fund and differences between these two. Hybrid fund and balanced funds are used interchangeably and they represent one and the same. However, balanced advantage funds are different variant compared to these two, which has arbitrage component also. One can also check top balanced advantage mutual funds.
5) Which are the best balanced mutual funds as per value research?
Here are some of the best balanced mutual funds value research that have 5 star ratings in June, 2020.
i) Canara Robeco Equity Hybrid Fund
ii) SBI Equity Hybrid Fund
6) Which are the best balanced mutual funds for retirement?
One can invest in all these 10 funds indicated above based on risk appetite. You can also consider these aggressive top 5 balanced mutual funds if you are investing early.
i) Canara Robeco Equity Hybrid Fund
ii) DSP Equity & Bond Fund
iii) SBI Equity Hybrid Fund
iv) ICICI Prudential Equity & Debt Fund
v) HDFC Hybrid Equity Fund
7) Which are best balanced mutual funds as per moneycontrol?
Here are the best balanced mutual funds on moneycontrol website based on 10 years returns.
i) ICICI Prudential Equity & Debt Fund
ii) Canara Robeco Equity Hybrid Fund
iii) SBI Equity Hybrid Fund
iv) DSP Equity & Bond Fund
v) Principal Hybrid Equity Fund
8) How do I invest in balanced mutual funds?
You can invest in mutual funds through any of the following ways.
a) Invest in balanced mutual funds directly through AMC website.
b) Invest in direct balanced funds through Mycams / Karvy.
c) Invest in these hybrid funds through intermediaries.
d) Invest in these funds through investment advisors or financial advisors.
e) You can invest through online portals.
f) You can invest in these balanced funds through any bank.
g) You can also invest in these mutual funds through demat account.
9) Who can invest in these best balanced funds in India?
If you are moderate to high risk taker and expecting 10% to 15% annualized returns and willing to invest for 5-10 years either through SIP or a lump sum, you can invest in these mutual funds.
Disclaimer: These hybrid funds do not offer guaranteed returns. Past performance may or may not repeat in future.
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Best Balanced mutual funds to invest in 2020 – Top 10 Hybrid Funds in India