Balanced funds offer diversification and professional management, which can help mitigate some of the risks associated with investing in just one asset class. However, balanced funds also come with their own set of risks, so it’s important to understand what you’re getting into before investing. In this article, we’ll explain what are balanced funds and their advantages.
A balanced fund is a type of mutual fund that invests in stocks and bonds. The fund’s asset allocation is typically set at 60% stocks and 40% bonds, but it can vary depending on the fund’s objectives. A balanced fund’s objective is to offer investors revenue and growth through investing in a variety of assets with various risk profiles. Balanced funds can be a good choice for investors who want exposure to both stocks and bonds, but don’t want to manage their own portfolio of individual securities.
There are different types of balanced funds, each with its own unique investment strategy. The most common types are
1. Growth Funds: These funds aim to provide capital growth by investing in a mix of growth stocks and bonds. They typically have a higher proportion of stocks than bonds. Growth funds are typically suitable for investors with a long-term investment horizon.
2. Income Funds: These funds aim to provide regular income by investing in a mix of dividend-paying stocks and bonds. They typically have a higher proportion of bonds than stocks. Income funds are typically suitable for investors who are looking for regular income from their investments.
3. Specialty Funds: These funds invest in a specific asset class or sector of the market. Examples of specialty funds include real estate, precious metals, and energy. Specialty funds are typically suitable for investors who are looking to diversify their portfolio or who have a specific investment objective.
4. Exchange-Traded Funds (ETFs): ETFs are a type of fund that trade on an exchange, like a stock. ETFs typically track an index, such as the Nifty50 and Sensex, or a sector of the market. ETFs are suitable for investors who are looking for a low-cost way to invest in a specific asset class or market sector.
These are just a few of the different types of investment funds available to investors. It’s important to understand the differences between these types of funds before investing.
In general, balanced funds can be a good option for investors who are looking for a diversified investment that offers potential for both capital appreciation and income. Additionally, because balanced funds typically have lower volatility than equity funds, they may be a good choice for investors who are looking to protect their portfolio from wild swings in the stock market and help investors stay focused on their long-term goals.
When it comes to taxation, balanced funds are treated as equity-oriented schemes if more than 65% of their portfolio is invested in stocks. If the stock component is less than 65%, then the scheme is considered a debt-oriented scheme.
Equity-oriented balanced schemes are taxed at 15% after indexation, while debt-oriented balanced schemes are taxed at the normal slab rate.
Returns from balanced funds are subject to Capital Gains Tax (CGT). The tax rate on short-term capital gains (STCG) is 15%, while the tax rate on long-term capital gains (LTCG) that exceed Rs 1 lakh in a fiscal year is either 10% without indexation or 20% with indexation.
Indexation is a method of adjusting the cost of investment for inflation so that the tax on capital gains is reduced. It is important to note that STCG and LTCG from balanced funds are taxed separately. This means that if you have both STCG and LTCG in a financial year, you will be taxed at 15% on STCG and 10% or 20% on LTCG, as the case may be.
Returns from debt funds are taxed at your marginal rate. This means that if you are in the highest 30% tax bracket, your returns from debt funds will be taxed at 30%. Short-term capital gains (STCG) from debt funds are taxed at your marginal rate, while long-term capital gains (LTCG) exceeding Rs 1 lakh in a financial year are taxed at 20% with indexation or 10% without indexation.
NAV in balanced funds is the net asset value of the fund’s underlying assets, minus any liabilities. The NAV is determined by dividing the total value of the fund’s assets by the number of shares outstanding.
The NAV can be used to measure the performance of a balanced fund over time. It can also be used to compare the performance of different balanced funds.
The NAV is calculated once a day after the markets close. The NAV will fluctuate as the value changes in the underlying asset.
When you buy or sell shares in a balanced fund, you will do so at the fund’s current NAV.
One of the main advantages of balanced funds is that they offer diversification within a single investment. By owning both stocks and bonds, you are spreading out your risk across different asset classes. This can help to smooth out returns over time and provide a more consistent experience for investors.
Another advantage of balanced funds is that they can help to provide some financial stability during volatile markets. For example, if the stock market is going through a rough patch, the bond portion of the portfolio may hold up better and provide some stability. This can help investors stay the course with their investment plan and not make any rash decisions.
The main downside of balanced funds is that they tend to be more expensive than other types of mutual funds. This is due to the fact that they typically have higher fees and expenses associated with them.
Additionally, balanced funds can also be less tax-efficient than other types of investments. This is because they often hold a mix of different types of assets, which can make it more difficult to maximize your tax savings.
Finally, balanced funds are a rather conservative investment strategy that provides steady returns and outdoes inflation. However, these funds tend to fluctuate due to changing interest rates.
Jupiter Money is an online investment platform that offers a variety of investment products, including balanced funds. Balanced funds are a type of mutual fund that invests in a mix of stocks and bonds in order to provide investors with both growth potential and income.
Here’s how you can invest in balanced funds with Jupiter Money:
1. Create an account on the Jupiter Money app
2. Choose the ‘Balanced Funds’ option from the list of investment products.
3. Select the fund(s) you wish to invest in and specify the amount you want to invest.
4. Your investment will be automatically rebalanced according to your chosen strategy, ensuring that your portfolio remains diversified.
Jupiter Money offers a wide range of balanced funds to suit your investment needs. So why not start investing today and take advantage of our low fees?
If you’re looking for a balanced investment strategy that offers potential growth and modest downside protection, investing in a balanced fund may be a good option for you. Balanced funds have the potential to provide investors with solid returns.
When selecting a balanced fund, it’s important to consider your investment goals and risk tolerance. Be sure to carefully review a fund’s holdings and track record before investing. With careful research and a well-thought-out investment strategy, investing in a balanced fund can be a smart way to help reach your financial goals.
1. Why invest in balanced funds?
The main reason to invest in balanced funds is for portfolio diversification. By investing in a mix of asset classes, investors can help reduce the overall risk of their portfolio while still having the opportunity to participate in the upside potential of the stock market.
2. How are balanced funds different from other types of investment vehicles?
Balanced funds are different from other types of investment vehicles, such as mutual funds and ETFs, because they invest in a mix of asset classes. This diversification can help reduce the overall risk of the portfolio while still having the opportunity to participate in the upside potential of the stock market.
3. How do I choose a balanced fund?
First, you should look at the asset mix of the fund and make sure that it aligns with your investment goals. Second, you should look at the fees associated with the fund. Both the expense ratio and sales charges can eat into your investment returns, so it is important to choose a fund with low fees. Finally, you should consider the track record of the fund. While past performance is no guarantee of future results, it can give you an idea of how the fund has performed in different market conditions.
Priyanka Rao is a content strategist for Jupiter.Money, and specializes in writing on topics related to finance, banking, budgeting, salary & wages, and other financial matters. She has a passion for creating engaging content that resonates with audiences across various digital platforms. In her free time, Priyanka enjoys traveling and reading, which allows her to gain new perspectives and inspiration for her work. With a keen eye for detail and a creative mindset, Priyanka is committed to creating content that connects well with her readers, enhancing their digital experiences.
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