|Name of Fund
|5 Year Returns (p.a.)
|Quant Absolute Fund
|Aggressive Hybrid Fund
|HDFC Balanced Advantage Fund
|Dynamic Asset Allocation
|ICICI Prudential Equity & Debt Fund
|Aggressive Hybrid Fund
|DSP Regular Savings Fund
|Conservative Hybrid Fund
|Axis Regular Saver Fund
|Conservative Hybrid Fund
Aggressive hybrid funds are the type of balanced funds and primarily invest in shares with some allocation to FD like instruments.
Spreading out of funding approach these funds are less volatile than pure equity funds and provide almost equal returns in longer duration.
In this, Up to 65-80% of the total assets invested in equity and equity-related instrument and about
Aggressive hybrid funds are considered as the equity mutual fund schemes for the purpose of taxation.
Conservative hybrid funds usually invest in the instruments like government securities, debentures, bonds, FD with some allocation in equity to generate capital appreciation. These funds have higher exposure to debt/bond securities.
As per the norms of SEBI, A conservative fund works under the dynamic ratio of debt and equity investments where 75 -90% of assets employed into debt-related instruments in order to generate consistent income and 10%-25% must be employed into equity to generate capital appreciation.
Investment in the aggressive hybrid funds are good if the investors have a higher risk tolerance level, an appetite of higher returns and a longer time horizon (more than 5 years).
On the other hand, if investors have a lower risk tolerance level, a desire of steady returns that prioritize preserving capital and a shorter time horizon (more than 3 years), then investment in conservative hybrid funds are good for them.
Yes, it is advisable to invest some portion of money in balanced funds because these funds are automatically spread an investor's money across a variety of types of stocks and debt which reduces the risk of value going down. These funds also allow the investors to withdraw money periodically through STP (Systematic Transfer Plan) without upsetting the asset allocation.
Yes, a retired person can invest in balanced funds. This provides a dividend option to supplement their post-retirement income and also gives the opportunity to portfolio’s diversification with a low risk level.
The Investment in balanced funds is good or not, can be decided by an investor by keeping in mind the following feature of balanced funds:
Balanced funds are categorized into two categories i.e. Equity oriented and Debt oriented and both have different tax treatment:
Equity-oriented Balanced funds have a larger portion of their corpus (at least 65%) parked in stocks and qualify for the same tax treatment as equity funds. This means the short term capital gains are taxed at 15% and long term capital gains are taxed at 10% above the limit of 100,000 gain in a financial year). However, these funds are more volatile due to the larger allocation to stocks.
Debt-oriented balanced funds are less volatile and good for risk averse investors. However, they offer lower returns. In this, if the investment is held for less than three years, the capital gains counted in short term and taxed at the normal income tax rates. But if the holding period is more than three years, the gains are considered as long term and are taxed at 20% after indexation benefit, which can significantly reduce the tax.
According to SEBI, a Balanced Advantage Fund is categorized under the hybrid funds and defined as an open-ended dynamic asset allocation fund. In these funds, the assets of a mutual fund scheme are allocated dynamically based on the market conditions to equity and debt securities.
The fund adjusts its direct equity exposure based on any fluctuations in market whether it is bull or bear market. Therefore, if the market’s price-to-book value ratio is low (based on historical values), the fund raises its direct stock exposure and relies less on arbitrage and vice versa.
Features of balanced advantage funds:
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