Do you want to sail on two boats at the same time without fearing the toppling over? Sounds a bit far-fetched. But, the investing industry is a place that can metamorphose this aspiration into a reality. A balanced fund is an amalgamation of the two conflicting schemes of the mutual fund industry. The scheme merges the benefits of stocks, bonds and money market instruments in a single portfolio. A balanced fund can rightly be called an all-rounder.
As the name signifies, a balanced fund retains a position of equilibrium between the two contrary systems. It is a type of scheme that opens up an avenue for the investors who aspire for a scheme dispensing the twin benefit of capital appreciation and the security of fixed income. They are a better choice in terms of growth as well as safety.
It is a phenomenal scheme for the new investors. The scheme gives you a precise idea of how the equity and the debt funds operate in the multifarious market situations. Hence, after getting acquainted with the behavior of the capital market, clients can have a cognizance of the same. Although the balanced funds may seem to be a little less exciting than other mutual fund schemes, they still endow a decent return on your investment as well as shield the money.
The past few years in the history of the world economy have witnessed a widespread economic recession. The axis of investing has sharply transposed from capital appreciation schemes to more substantial funds. Therefore, the balanced funds are gaining a lot of importance in such situations. A balanced fund maintains a perfect counterbalance between capital returns and the protection of fixed return bonds. There is a 60:40 or 50:50 ratio shared between the two investment strategies. Sometimes the equity quota may rise as high as 75% depending upon the stock exchange scenario.
Balanced funds also known as hybrid funds are the most flexible schemes in the investing family. You can choose the proportion of the investment in equity and debt according to your risk bearing potential. Say, if you are willing to capture more of equity, then the ratio can be 75:25, 75% for equity and 25% for the fixed income instruments respectively. But, if you are more inclined towards security then 60:40 ratio can be exemplary for you. The flexibility of choosing between the diversification ratio is absent in the rest of the mutual fund schemes.
Therefore, by selecting the balanced mutual funds the client is able to earn the following benefits:
- The aggressive growth outlook of the equity-oriented schemes is attained quickly.
- The certainty of fixed returns charms the novice investors towards balanced funds with a view to safeguarding the money against the tantrums of the market.
- Getting a mixed bag of returns is not possible in any other investing scheme. Thus, a balanced fund is the king of hybrid investment methodology.
- Through this scheme, the investors are in a way paving the path for economic and infrastructural development.
- By investing in the bonds and securities, the investor is indirectly facilitating in consolidating the economic development.