Investment in equity and mutual funds have shown incredible growth in the past few years. One can make handsome returns by investing in the stocks and mutual funds schemes. Since mutual fund schemes have a diversified portfolio, it is an ideal investment avenue for investors who want to play safe.
There are numerous types of mutual funds and one such type of mutual fund is balanced mutual funds. A balanced mutual fund offers the benefit of diversification by allowing you to invest in multiple asset classes i.e. debt and equity. This combination of investment not only helps you earn short term income but also build long term wealth.
In this article, we will walk you through the list of best balanced mutual funds that you may consider investing in. We will also learn the meaning and advantages of investing in balanced mutual funds.
Let us first learn the meaning of a balanced mutual fund.
What is a Balanced Mutual Fund?
A balanced mutual fund is also called hybrid mutual fund. These mutual funds invest its assets in debt instruments and equities to generate good returns and reduce investor’s risk. These mutual funds are good for investors who have a conservative approach and are looking for fixed returns. Balanced mutual funds typically invest 50% to 70% of their portfolio in the stock and the remaining is invested in bonds and other instruments.
Before investing in top balanced mutual funds you must be very careful. Below is the list of best balanced mutual funds 2019 that you may consider for investing for long term.
List of Best Balanced Mutual Funds 2019
Let us now learn the advantage of investing in the top balanced mutual funds.
Advantage of Investing In The Top Balanced Mutual Funds
The biggest advantage of top balanced mutual funds schemes is that they offer diversification. The combination of debt and equity makes them less vulnerable and risky to market volatility. The debt part of the fund ensures that the investor will get an assured fixed return while the equity part is for continuous capital appreciation. Therefore, while making an investment in top balanced mutual funds, the investor must consider the combination that is offered in the scheme.
Another benefit of investing in balanced mutual funds is that it offers the benefit of rebalancing. In situations where the equity markets are overvalued as compared to debt markets or otherwise, the fund manager has the freedom to shift between the asset classes.
Since mutual funds offer many tax benefits, let us now learn about the tax implications in the case of balanced mutual funds.
Tax Implications for Equity-Oriented Balanced Funds
The balanced mutual funds which have an exposure to equity of 65% or more fall under the equity asset class for taxation purpose. For the gains that are booked within a year of the purchase of equity-oriented balanced fund, short term capital gain tax at the rate of 15% is applicable. When these funds are held for long term i.e. more than 12 months, tax at the rate of 10% is applicable on the gains exceeding Rs. 1 lakh.
Tax Implications for Debt-Oriented Balanced Funds
The debt-oriented balanced funds are taxable just like any other debt funds. If the debt-oriented balanced funds are held for a period of 36 months or more, long term capital gain tax is applicable. On the other hand, if these funds are sold with short term capital gains, it is taxable at 20% with the benefits of indexation.
From the above taxation implications, it is clear that the equity-oriented balanced funds have a tax advantage over the debt funds. Investing in one of the top 5 balanced mutual funds will reap you handsome returns in the long run along with tax benefits.
The Bottom Line
Since balanced mutual funds invest in both debt and equity, they are an ideal investment option for people looking for the best of both worlds. Investing in balanced mutual funds ensure capital appreciation as well as minimise potential risks. Therefore, retirees and low-risk tolerant investors especially invest in balanced mutual funds. These mutual funds help to fight inflation and generate income to supplement current needs.
Whether you are a beginner or a seasoned investor, you can contact IndiaNivesh Ltd. for assistance in investing in the top 5 balanced mutual funds.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.