Those with a limited risk appetite, tend to invest their money in balanced funds. In fact, over the last couple of years, we have seen a lot of money flowing into them.
How best balanced funds or hybrid funds work?
These funds invest their money in both debt and equity. So, if stock markets collapse, the amount invested in debt, can provide a hedge against a complete meltdown.
On the other hand when equities rally, the fund gets the best of both worlds, as returns from equity tends to be superior. Returns from these funds have been good over the longer term, thanks to a surge in equities over the last few years.
However, returns most of the time can be uncertain, given that a bulk of the money can be deployed into equities. So, one needs to be cautious before investing. Now, let us take a look at the 5 best balanced funds or hybrid funds to invest in:
1) Mirae Asset Hybrid - Equity - Growth
This has been ranked as number 1 by Crisil, in the hybrid and balanced fund category. The returns have been superb when compared to peers and hence Mirae Asset is among the best balanced or hybrid funds to invest in.
The fund has invested almost 73 per cent in stocks, with the balance being invested in equities. The one year SIP returns from the fund is almost 14 per cent, which is not bad at all.
The fund has exposure to stocks of HDFC Bank, Reliance Industries, Axis Bank, ICICI Bank and TCS. It has also made investment in high quality debt instruments. The three year annualized return from the fund is above 14 per cent
2) Reliance Arbitrage Fund-Direct Plan-Growth
This is another fund that has a 5-star rating from CRISIL. It is among the top performing balanced or hybrid funds. The fund has a very small expense ratio of 0.34 per cent.
The fund has invested almost 67 per cent in equities and the balance remains in high quality debt. the fund has generated absolute returns of 43 per cent in the last 5 years.
Reliance Arbitrage has investment in the stocks of HDFC, Infosys, Reliance Industries, TCS and Yes Bank.
3) HDFC Hybrid Equity Fund
This is an aggressive Hybrid Fund, which also invests substantially in equities. The fund has performed reasonably well over the last few years, with returns of nearly 14 per cent each year, over the last 5 years.
The fund has investments in shares of HDFC Bank, ICIC Bank, Infosys, HDFC and ITC, among its top 5 picks. On the other hand it has investments in debentures and bonds of very high quality as well.
This is a good balanced fund to be in, if you are a long term investor. Hybrid or balanced funds are good for those willing to take a limited risk and the HDFC Hybrid Equity Fund is thus a good bet.
4) ICICI Prudential Equity and Debt Fund
This is another balanced fund or a Hybrid Fund that you may call. Like all other hybrid funds ICICI Prudential Equity and Debt Fund, also invests its money in the debt and equity market, but is more skewed towards equity.
The company has investment in shares of ICICI Bank, ONGC, NTPC, Bharti Airtel, State Bank of India etc. It also has investment in high quality debt of Axis Bank and ICICI Bank.
The fund has given a return of 13.26 per cent in the last three years and three per cent in the more short term of 1 year. This is among the best balanced and Hybrid Funds to invest in for the long term.
5) SBI Equity Hybrid Fund
This too is among the well managed hybrid or balanced funds to invest in. The fund has a staggering Rs 30,000 crores, as assets under management. Over the last few years, it has given decent returns.
For example, the last 5 year returns has been 14.47 per cent (each year), while the last 10 year returns has been 15 per cent.
The current net asset value of this balanced fund is Rs 134.12 under the growth plan. The bank has investment in the shares of ICICI Bank, State Bank of India, Kotak Mahindra Bank etc.
It also has investment in high quality debt instruments.