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What is a balanced fund in India?

By Ambari Datta Gupta

What is a balanced fund in India?
While investing, it is always difficult to choose the right mix of debt and equity funds. If you want to strike a right balance between them then you can bank upon balanced funds. Balanced funds, as suggested by the name, invests in debt and equity in a balanced manner. That is, it invests in debt and equities more or less in equal proportion.

Sometimes, the fund manager changes the proportion of distribution between debt and equity based on the market. The re-balancing of funds hedge risks in the equity market.


So, even when the stock market is down, these funds may not end-up making losses due to their exposure to debt. As the fund managers churn the portfolio depending on the market fluctuations, you don't have to bother about studying how the market is doing and then change the allocation between debt and equity accordingly.

A well managed balance fund achieves best regardless of market fluctuations. When the market is down, debt funds make the portfolio less risky. Again, when the market is up, the bond yield falls and the equity generates higher returns.

The objective of balanced fund is to reduce risks. So, the diversification in equity and debt funds make the funds less risky. Therefore, balanced funds mixes safety along with capital appreciation and income. Balanced funds are therefore a good investment instrument for risk averse investors.

These funds help in the wealth consolidation phase of your life. During the wealth consolidation phase you start decreasing the risk and therefore balanced funds are good investment option. So, when you are planning to retire then you can start investing in balanced funds.

Balanced funds being ready-made funds save you from the the hassles of choosing the right proportion of equity and debt fund in your portfolio.

Click here to read on how capital gains are computed on mutual funds?


One of the advantages of the balanced fund is psychological. Sometimes, it may happen that when the market is down investors panic and make a mistake in their portfolio. It may happen when the markets are up and the investors fail to grab the opportunity.


Investors should always keep in mind that balanced funds are subject to market risks as they invest in equities. In some cases, the fees in the balanced fund is higher than if you invest in individual funds.

Story first published: Tuesday, July 22, 2014, 13:29 [IST]
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