Balanced Mutual Funds

March 10, 2011   ·   0 Comments

Lesson 5: Balanced Mutual Funds

www.stockssavvy.comA mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds, to provide both income and capital appreciation while avoiding excessive risk. The purpose of balanced funds (also sometimes called hybrid funds) is to provide investors with a single mutual fund that combines both growth and income objectives, by investing in both stocks (for growth) and bonds (for income). Such diversified holdings ensure that these funds will manage downturns in the stock market without too much of a loss; the flip side, of course, is that balanced funds will usually increase less than an all-stock fund during a bull market.

By investing in both shares and fixed-return investments, balanced funds seek the best of both worlds.  They include the power of equities (shares) and the stability of debt market instruments (fixed return investments like bonds) and are most likely to take you to your goal safely. They are the best hope for those who want to benefit from the stock market but don’t have the stomach for volatility.

We believe all sorts of investors should have at least some portion of their investments in balanced funds.  What makes balanced funds such a power investment tool is their inherent design, which allows them to maintain an effective balance between debt and equity.

A good investment to consider

Balanced funds have proved their worth time and again and rewarded investors with superlative returns and stability. The returns may not be as flashy as diversified equity funds, but balanced funds are the ultimate vehicle for long-term growth for conservative investors. They will save you from bumpy rides and ensure a soft landing.

Balanced Funds proves to be Ideal investment Destination for one whose Investment time frame is between 3 to 7 Years. For a time frame of more than 7 years, Diversified Funds will yield a better return than Balanced Funds. If Your time frame is less than 3 years, then Fixed Deposit, Recurring Deposits are good option to be in for a safe returns.

for SIP of 1000 Rs/Month:

Sr. No. Name of Fund Value after 3 Years Value after 5 Years
1) HDFC Balanced Fund(D) 46,127 Rs. 75,180 Rs.
  HDFC Balanced Fund(G) 53,994 Rs. 94,109 Rs.
2) Reliance RSF Balanced(D) * 21,652 Rs. *
  Reliance RSF Balanced(G) 54,325 Rs. 1,03,710 Rs.
3) ICICI Pru Balanced Fund (G) 46,795 Rs. 81,641 Rs.
  ICICI Pru Balanced Fund (D) 42,000 Rs. 62,626 Rs.
4) HDFC Children Gift Investment 51,989 Rs. 96,390 Rs.
  HDFC Children Gift Saving 44,017 Rs. 79,941 Rs.
5) SBI Magnum NRI Invest –Flexi Asset Plan(D) 45,618 Rs. 78,495 Rs.
  SBI Magnum NRI Invest –Flexi Asset Plan(G) 45,652 Rs. 78,403 Rs.
6) Sundaram BNP Paribas Balanced (G) 87,710 Rs. 48,324 Rs.
  Sundaram BNP Paribas Balanced (D) 43,196 Rs. 71,212 Rs.
7) HDFC Prudence Fund(G) 56,173 Rs. 1,06,211 Rs.
  HDFC Prudence Fund(D) 46,550 Rs. 74,536 Rs.

* Indicates SIP Returns are for only last 20 Months

Standout Winner is Reliance Regular Saving Fund Balanced (Growth) option not only because of higher returns but also, it gives a benefit of Insurance Cover of Double the amount put in SIP absolutely free of cost. HDFC Prudence Fund just lags Reliance Regular Saving because of the unavailability of the free Insurance option.

If one want to know more about SIP or want to calculate the Returns on these amount, then Turn to the third Chapter of the Series i.e. Systematic Investment Plan.

Sharing your Views/Ideas/Comments will be really appreciated.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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