Introduction
Balanced Fund is a new category in Hybrid Funds. Hybrid Funds were recategorized in 2017. They are aggressive, where 40-60% of the total assets go towards equity and 40-60% towards debt. Moreover, there are no arbitrage opportunities. There is the liberty to invest in both equity and debt. For instance, if the markets are bullish, the fund managers may invest 60% in equity and 40% in debt instruments. If one is bearish on stocks, he may invest 40-50% in equity and the remaining in debt. The fund managers can decide the proportion according to the market conditions and book profits accordingly. The article mentions the best balanced funds in India in terms of their performance, downside protection, and returns.
The combination of debt and equity is safer than pure vanilla equity funds. Moreover, the debt part offers stability when the market falls, and equity provides excess returns in a bull run. However, these funds are riskier than debt funds. Conservative investors can invest in balanced funds with a time horizon of five years or more.
Additionally, balanced funds are taxable according to debt funds. If one holds the investment for less than three years, the returns get added to the total income and are taxable according to debt funds. However, if one holds them for more than three years, one receives indexation benefits. In the long term, the gains are taxable at 20% after adjusting the returns with the inflation rate.
Best Balanced Funds in India
The best balanced funds in India, according to their downside protection and performance are as follows:
ICICI Prudential Asset Allocator Fund (FoF)
ICICI Prudential Mutual Fund is the fund house that has launched ICICI Prudential Asset Allocator Fund (FoF). It was launched on 1st January 2013. It is one of the best balanced funds in India. The asset under management is ₹15,824 crores as of 31st March 2022. It is a medium-sized fund. The expenses ratio is 0.07%, lesser than other balanced funds. Currently, the fund invests 47.63% in debt and 31.03% in equity. In one year, the fund provided 5.87% returns and 11.72% average annual returns since inception. Further, the fund doubles in money invested every six years.
The fund generated returns consistently over the past years. Also, it increases returns for each additional unit of a mutual fund. Hence, the performance quality is very strong (5 out of 5). It also controls losses during correction and delivers returns without frequent ups and downs. Therefore, the downside protection ability is strong (4 out of 5). It provides returns in-line with other funds in the same category. The scheme’s primary equity investment is in the financial sector. However, its investment proportion towards financial is less in comparison to other funds in the same category. Moreover, the debt portion has an investment in low credit rating instruments indicating the borrower’s quality to repay the money is not good.
The top holdings are in mutual funds such as ICICI Prudential Savings Fund, ICICI Prudential Flexible Income, ICICI Prudential All Season Bond Fund, etc.
UTI Retirement Pension Fund
UTI Mutual Fund is the fund house that has launched UTI Retirement Pension Fund. It was launched on 1st January 2013. The asset under management is ₹3,546 crores as of 31st March 2022. It is a medium-sized fund. The expenses ratio is 1.02%, comparatively lesser than other funds. Currently, the fund invests 53.66% in debt and 38.51% in equity. In one year, the fund provided 4.39% returns and 9.35% average annual returns since inception. Further, the fund doubles in money invested every nine years.
The fund’s ability to generate returns consistently and increase returns for each additional unit of a mutual fund is average (3 out of 5). However, they have performed strongly to control losses during correction and deliver returns without frequent ups and downs (4 out of 5). It provides returns in-line with other funds in the same category. The scheme’s primary equity investment is in the financial, automobile, technology, construction, and consumer staples sector. However, its investment proportion towards financial and automobiles is less compared to other funds in the same category. Moreover, the debt portion has an investment in low credit rating instruments indicating the borrower’s quality to repay the money is not good.
The top holdings are in ICICI Bank, HDFC Bank, GOI, etc.
Franklin India Pension Fund
Franklin Templeton Mutual Fund is the fund house that has launched Franklin India Pension Fund. It was launched on 1st January 2013. The asset under management is ₹435 crores as of 31st March 2022. It is a medium-sized fund. The expenses ratio is 1.51%, comparatively higher than other funds. Currently, the fund invests 56.49% in debt and 39.41% in equity. In one year, the fund provided -1.20% returns and 9.59% average annual returns since inception. Further, the fund doubles in money invested every eight years.
The fund’s ability to generate returns consistently is not good, and increased returns for each additional unit of a mutual fund are average (3 out of 5). However, they have underperformed while controlling losses during a correction. They deliver returns without frequent ups and downs. Hence, their ability to protect their portfolio during the downside is strong (4 out of 5). It provides returns in-line with other funds in the same category. The scheme’s primary equity investment is in the financial, energy, technology, services, and materials sector. Moreover, the debt portion has an investment in moderate credit rating instruments.
The top holdings are GOI, ICICI Securities Ltd, Reliance Jio Infocomm Ltd, Housing Development Finance Corp, Ltd etc.
Franklin India Life Stage FoF 30s Scheme
Franklin Templeton Mutual Fund is the fund house that has launched Franklin India Life Stage FoF 30s Scheme. It was launched on 1st January 2013. The asset under management is six crores as of 31st March 2022. It is a medium-sized fund. The expenses ratio is 1.04%. Currently, the fund invests 41.03% in debt and 52% in equity. In one year, the fund provided 3.12% returns and 9.83% average annual returns since inception. Further, the fund doubles in money invested every eight years.
The fund’s ability to generate returns consistently and increase returns for each additional unit of a mutual fund is poor (2 out of 5). Moreover, they have underperformed while controlling losses during correction and delivering returns without frequent ups and downs (2 out of 5). It provides returns in-line with other funds in the same category. The scheme’s primary equity investment is in the financial sector. Moreover, the debt portion has an investment in low credit rating instruments.
The top holdings are in mutual funds such as Franklin India Builder Plan, Franklin India Bluechip Fund, etc.
