Balanced Mutual Funds combine the wealth growing potential of equity funds with the security and stability of debt funds. In a balanced fund, more than 65 percent of the corpus is invested in equities and the rest in invested in debt and money market instruments.
Balanced Mutual Funds are taxed like pure equity funds. In other words, if you hold on to these funds for more than one year, the returns are tax-free else they are taxed at 15 percent. If you are an investor who wants to invest in equities albeit with a moderate risk appetite, and are looking for a time horizon for more than 3 years, you can invest in a good balanced fund for optimal returns.
It has been seen that balanced funds do not just do a good job at cushioning losses when markets fall, they give returns that are comparable to pure equity funds on a long-term. In the last five years, we have seen that the average returns from balanced funds have been around 12 percent which is quite close to the returns given by large caps and Sensex in that period.
How do you choose a good balanced fund? Well, you have to look for consistency in performance across different market cycles in the past 3, 5 and 10 years. Look out for a fund that enjoys a reputable parentage and has a fund manager who has been with the fund house for a fair amount of time.
Here are the top 5 best hybrid or balanced mutual funds for 2017
- HDFC Balanced Fund – The fund was formed in September 11, 2000. It has given 22.32 percent, 20.18 percent, 17.79 percent and 15.93 percent return per annum in the past 1, 3, 5 and 10 years. Since its launch, the fund has given 16.83 percent returns per annum. The expense ratio of the fund is 1.98 percent and the AUM (Assets Under Management) size of the fund is Rs. 10,186 crore, as on March 31, 2017. HDFC Balanced Fund has beaten the benchmark and the category average remarkably over the past seven years. It has maintained more or less a consistent equity asset allocation within the range of 68 to 72 percent, which is higher than its peers. The fund’s equity portfolio has a higher number of mid caps and small caps as compared to its peers. The debt portion of the fund is also admirable, as it has invested in high quality bonds with fairly long duration. Chirag Setalvad is the fund manager, who has been associated with the fund house since 2007.
- Birla Sun Life Balanced ’95 – This solid performer was launched on February 10. 1995. It has returned 22.36 percent, 19.99 percent, 17,77 percent and 17.77 percent per annum in the past 1, 3, 5 and 10 years. The fund has an AUM size of Rs. 7.419 crore and the expense ratio is 2. 29 percent. The returns since launch has been 21. 29 percent per annum. The fund managers include Dhaval Shah, Mahesh Patil and Pranay Sinha. The fund has been a consistent performer over the years, beating the benchmark in the past ten years. 65 to 75 percent of its assets are allocated in equities while the rest are in bonds. The equity component is mostly multicap with a higher degree in large caps. The fund has performed quite well in both bull and bearish markets, with a remarkable performance in the past three and five years.
- DSP BlackRock Balanced Fund – Formed on May 27, 1999, the fund has returned 15.67 percent per annum since launch. It has delivered 26.38 percent, 21.80 percent, 16.89 percent and 13.17 percent per annum in the past 1,3, 5 and 10 years. The expense ratio for the fund is 2.33 percent with an AUM size of Rs. 3542 crore. The fund managers involved with the fund are Atul Bhole, Pankaj Sharma and Vikram Chopra. This is a fund which offers the double benefit of growth and stability, particularly in volatile times. The equity potion is typically at the 70 to 75 percent range, while the rest is pooled in the safety of debt.
- HDFC Prudence Fund – The oldest balanced fund in the list, HDFC Prudence Fund was formed on February 1, 1994. It has returned 19.51 percent per annum since launch, and over the past 1,3, 5 and 10 years, it has delivered 31.96 percent, 19.79 percent, 17.49 percent and 15.08 percent per annum. The expense ratio for the fund is 2. 27 percent. The fund is managed by Prashant Jain, who has been with the fund since inception. The fund has an impressive long term record, but the standard deviation of the fund is higher than relative. However, the fact that fund has performed admirably well with an accomplished fund manager at the helm of affairs, speaks for itself. The emphasis is more on banking stocks and in companies with lower market caps, as compared to its peers. The aggressive moves of the fund manager is apparent on the debt component as well, with a higher than average allocation to government paper with longer maturity periods.
- Tata Balanced Fund – The fund rivals SBI Magnum Balanced Fund not only in terms of performance but also history. Having formed on October 8, 1995, it has delivered 16.84 eprcent, 19.93 percent, 17.89 percent and 14.50 percent per annum in the past 1, 3, 5 and 10 years. Since its launch, it has delivered 16.43 percent per annum as returns. The expense ratio of the fund is 2.21 percent and the AUM size is Rs. 6,396 crore. The fund is helmed by two fund managers – Murthy Nagrajan and Pradeep Gokhale. The fund is synonymous with consistency, having been among one of the top 10 balanced funds in the past ten years. Tata Balanced Fund maintains a 75-25 equity debt allocation ratio, with large caps making 60 percent of the equity allocation.