Article

4 Balanced Fund

Jitender Singh

18 May 2018

Balance funds invest in equity and debt instrument to follow a moderate approach. Generally, balanced funds invest 70-80% in equity and 20-30% in debt depending on the market condition and investment mandate. The main objective of balanced funds is to create wealth in long term by following a moderate approach.

These funds are less volatile than equity mutual funds since that invest 20-30% in debt securities. Thus, these funds are suitable for investors who are looking to create wealth in long term with comparatively less risk than equity mutual funds. Below are the some of the top 4 recommended balanced fund.

Scheme Name

AUM (Rs Cr)

1 Y (%)

3 Y (%)

5 Y (%)

Balanced Funds - Equity Oriented

Aditya Birla SL Balanced '95 Fund(G)

14,662

8.4

11.3

16.6

HDFC Balanced Fund(G)

21,779

10.8

12.1

19.0

ICICI Pru Equity & Debt Fund(G)

28,807

9.8

12.2

17.5

Reliance Equity Hybrid Fund(G)

13,426

12.8

12.2

17.0

1 year returns are absolute; 3 years and 5 year returns are CAGR.
AUM as of April 2018, Returns are as on May 11, 2018

1) Aditya Birla SL Balanced ’95 Fund

  • Aditya Birla SL Balanced ’95 Fund does a tactically allocates 50-75% to equities depending upon the market scenario.
  • The fund follow top down approach to select the sectors and bottom up approach for stock selection.
  • As on April 30, 2018, the fund had invested ~21% of its AUM in debt, ~51% in large-cap stocks and ~17% in mid-cap stocks.

2) HDFC Balanced Fund

  • HDFC Balanced Fund aims to maintain an effectively diversified portfolio across market capitalizations.
  • The fund invests in companies that enjoy leadership position in their industry with superior growth prospects and available at a reasonable price.
  • The fund manager actively manages the debt portfolio based on the interest rate outlook. Securities are selected after assessing credit, interest rate and liquidity risk.
  • As on April 30, 2018, the fund has invested ~28% of its AUM in debt instruments, ~46% in large-cap stocks, ~14% in mid-cap stocks and ~7% in small-cap stocks.

3) ICICI Pru Equity & Debt Fund (Erstwhile ICICI Pru Balanced Fund)

  • ICICI Pru Balanced Fund does a tactical allocation between debt and equity to ensure optimal risk reward.
  • The fund increases its exposure in debt market when the market is overvalued and increases its allocation to equity when market is undervalued.
  • As on April 30, 2018, the fund had invested ~26% of its AUM in debt, ~57% in large-cap stocks and ~6% in mid-cap stocks.

4) Reliance Equity Hybrid Fund (Erstwhile Reliance Reg Savings Fund-Balanced Option)

  • Reliance Reg Savings Fund-Balanced Option does a tactical allocation between debt and equity to generate superior risk adjusted returns.
  • To generate alpha the fund primarily invests in large-cap stocks with some tactical allocation to emerging leaders.
  • In debt securities, the fund follow accrual strategy and invest in high quality instruments with moderate duration
  • As of April 30, 2018, the fund had invested ~27% of its AUM in debt, ~58% in large-cap stocks and ~9% in mid-cap stocks.
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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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4 Balanced Fund

Jitender Singh

18 May 2018

Balance funds invest in equity and debt instrument to follow a moderate approach. Generally, balanced funds invest 70-80% in equity and 20-30% in debt depending on the market condition and investment mandate. The main objective of balanced funds is to create wealth in long term by following a moderate approach.

These funds are less volatile than equity mutual funds since that invest 20-30% in debt securities. Thus, these funds are suitable for investors who are looking to create wealth in long term with comparatively less risk than equity mutual funds. Below are the some of the top 4 recommended balanced fund.

Scheme Name

AUM (Rs Cr)

1 Y (%)

3 Y (%)

5 Y (%)

Balanced Funds - Equity Oriented

Aditya Birla SL Balanced '95 Fund(G)

14,662

8.4

11.3

16.6

HDFC Balanced Fund(G)

21,779

10.8

12.1

19.0

ICICI Pru Equity & Debt Fund(G)

28,807

9.8

12.2

17.5

Reliance Equity Hybrid Fund(G)

13,426

12.8

12.2

17.0

1 year returns are absolute; 3 years and 5 year returns are CAGR.
AUM as of April 2018, Returns are as on May 11, 2018

1) Aditya Birla SL Balanced ’95 Fund

  • Aditya Birla SL Balanced ’95 Fund does a tactically allocates 50-75% to equities depending upon the market scenario.
  • The fund follow top down approach to select the sectors and bottom up approach for stock selection.
  • As on April 30, 2018, the fund had invested ~21% of its AUM in debt, ~51% in large-cap stocks and ~17% in mid-cap stocks.

2) HDFC Balanced Fund

  • HDFC Balanced Fund aims to maintain an effectively diversified portfolio across market capitalizations.
  • The fund invests in companies that enjoy leadership position in their industry with superior growth prospects and available at a reasonable price.
  • The fund manager actively manages the debt portfolio based on the interest rate outlook. Securities are selected after assessing credit, interest rate and liquidity risk.
  • As on April 30, 2018, the fund has invested ~28% of its AUM in debt instruments, ~46% in large-cap stocks, ~14% in mid-cap stocks and ~7% in small-cap stocks.

3) ICICI Pru Equity & Debt Fund (Erstwhile ICICI Pru Balanced Fund)

  • ICICI Pru Balanced Fund does a tactical allocation between debt and equity to ensure optimal risk reward.
  • The fund increases its exposure in debt market when the market is overvalued and increases its allocation to equity when market is undervalued.
  • As on April 30, 2018, the fund had invested ~26% of its AUM in debt, ~57% in large-cap stocks and ~6% in mid-cap stocks.

4) Reliance Equity Hybrid Fund (Erstwhile Reliance Reg Savings Fund-Balanced Option)

  • Reliance Reg Savings Fund-Balanced Option does a tactical allocation between debt and equity to generate superior risk adjusted returns.
  • To generate alpha the fund primarily invests in large-cap stocks with some tactical allocation to emerging leaders.
  • In debt securities, the fund follow accrual strategy and invest in high quality instruments with moderate duration
  • As of April 30, 2018, the fund had invested ~27% of its AUM in debt, ~58% in large-cap stocks and ~9% in mid-cap stocks.
Research Disclaimer