Santa Clarita Valley's #1 Local News Source

Close this search box.
Close this search box.
Close this search box.

The Art of Investing in Balanced Mutual Funds 


Investing is a smart way of building wealth in the long term. But it can be difficult to understand where to begin. One such solution to this problem is balanced funds. They provide investors with a single fund that can meet almost all of their investing needs. Balanced funds are also known as hybrid funds. In this article, we will cover everything you need to know about these funds.  

How Balanced Funds Work? 

As balanced mutual funds function as a diversified portfolio, you can invest in it and then forget about it. After you put money into the fund, it automatically allocates it among various assets. 

They contain both kinds of assets – equity and debt in a single investment. However, the ratio is based on the asset allocation decided for that particular fund. You also gain the benefits of diversification with this fund. 

Top Advantages of Investing in Balanced Mutual Funds 

Here are the advantages of investing in these mutual funds. 

  1. A Consistent Source of Income 

Interest-bearing debt in balanced funds can provide investors with a steady income source. By contrast, the equity portion offers the potential for an increase in capital. It’s good for retirees since it maintains a proportionate risk-reward ratio. 

  1. Managing the Market’s Unpredictability 

By investing in the best hybrid mutual funds, investors can achieve portfolio stability because they comprise both medium-low-risk debt instruments and market-linked equity assets. The variety of assets these funds hold is what attracts investors to them. The combination of debt and equity decreases the risk of market fluctuations and acts as the necessary buffer to protect the investment from excessive mark-to-market losses. 

  1. Tax Benefits 

With this investment plan, fund managers can switch between debt and equity. Additionally, balanced funds may offer tax benefits for equity investment. Investors need to pay short-term or long-term capital gains tax based on the holding period. 

Disadvantages of Balanced Funds 

Here are the disadvantages of investing in balanced funds: 

  1. Moderate Return on Investment 

Balanced funds generate moderate returns. They may not generate returns as much as pure equity funds. This, in turn, limits the growth potential. 

  1. Lack Of Control 

Qualified fund managers oversee balanced funds. The assets that are purchased or sold are not directly under the control of investors. Like all unit trust funds, balanced funds are intended for investors who want to manage their money passively. 

  1. Fees 

Balanced funds come with management fees which can reduce the overall return. It’s like almost all other types of mutual funds. Investors should carefully consider the fees relative to the fund’s performance and their investment goals. 

Final Words 

Investing in balanced funds offers security against any losses and the guarantee that your investment will increase in value, which is the main benefit. This indicates that those looking for low-risk investments and the possibility of capital growth would benefit most from these funds. If you’re looking to invest in balanced funds, consider Dhan, India’s one of the leading investment and trading platforms that offers you a wide range of tools and indicators to make an informed decision. 

Related To This Story

Latest NEWS