Investment in variable return investment options is risky affair, especially in stock market and in mutual funds. However, in market some set of mutual funds are available which are less prone to risk. These type of mutual funds are known as Balance Mutual Funds.
A balance mutual funds is ideal for investors who are looking for safety and moderate returns. These type of mutual funds invest in equity and debt component both. These type of mutual funds are also known as hybrid mutual funds. Today I will share information about 5 Best Balance Mutual Funds to invest in 2016-17. Before disclosing details about top balance funds let’s try to understand what is balance mutual funds? and how to select balance mutual funds?
What is Balance Mutual Funds?
A Balance Mutual Funds is a special type of mutual fund that invests in both stocks and bonds. These type of mutual funds are less risky and generate moderate returns. A Balance mutual fund fulfill the objective of growth and income generation and provide best of both worlds. A Balance Mutual Fund usually invest 60-65% in equity and balance in bonds. Looking at current market scenario balance mutual fund is an ideal choice of investment as they are equipped to withstand shocks in falling market.
Also Read – 20 Best Mutual Funds for Investment in 2016
How Balance Fund works?
A Balance fund works on rebalancing act. This rebalancing happens based on market conditions. Suppose you have invested Rs 100000 in balance fund. Out of this money 60% (Rs 60000) shall be invested in the equity market and remaining (Rs 40000) in the debt market.
Suppose after investing money stock market falls by 10%, this will reduce your equity exposure by 10%, in order to balance asset allocation 60-40% ratio, fund manager has to purchase 10% additional stocks.
At the opposite side if stock market goes up by 10%, your equity exposure is increased by 10%. In order to maintain 60-40% ratio, fund manager has to book profit by selling 10% stocks.
Thus, you can say that hybrid fund follows the strategy of “Buy low sell high” and help you in withstanding market fluctuations. This makes balance mutual fund attractive and most suitable investment option for the conservative investor. Hope you agree with me.
Also Read – How to Invest in Direct Mutual Funds Plans?
How to Select Balance Mutual Funds?
Before investing in balance mutual funds you should consider following parameters.
The asset allocation of the fund is a vital parameter in selecting a hybrid fund. The detail about this asset breakup is provided by every fund house. It is advisable to invest in a fund with more than 60% equity exposure.
The Expense ratio is another point you should consider before investing in any mutual funds. The Expense ratio is administrative and management charges that fund is using to cover expenses. Lower the expense ratio means better is fund.
Fund Manager tenure and experience
Another important parameter is who is managing the fund and what is his experience in managing large fund portfolio. As fund manager plays an important role in fund’s performance you should evaluate fund on the experience of fund manager and track record.
Performance of Fund
Needless to say, performance of the fund is vital and most important. Capital appreciation and income is a preliminary reason for investing in any mutual fund. You should check at least last five years’ performance of the fund.
Risk Level and Rating
Another parameter for evaluation of fund is risk level and star rating given by various agencies. This parameter is just to take a hint before investing.
Top 5 Best Balance Mutual Funds to Invest in 2016-2017
Best Balance Mutual Funds to Invest in 2016-17 are given below.
Why you should Invest in Balance Mutual Funds?
Some important points which will convince you that you should invest in balance mutual funds are given below.
Best of Both Worlds
Balance mutual fund investment is like best of both worlds. You can get advantage and exposure of equity as well as debt investment option.
Buy Low Sell High
Rebalancing act of hybrid mutual funds is designed in a manner that they buy equity at lower price and sell at higher price. Thus safeguarding money of investors.
Safety & Low Downside Risk
Balance funds provide safety to investor as they invest in equity as well as debt instruments. Hybrid fund has low downside risk and it helps in volatile market.
Over to You
Balance Fund is one of the best investment option for investor seeking moderate returns. It offers multiple advantages to the investor. Looking at current market condition you should opt to invest in the best balance mutual fund, which will help you to withstand against stock market fall.