Mutual Funds
5 Golden Rules of Mutual Fund Investing for First-Timers
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Want exposure to both equity and debt instruments? Well, then strike the desired balance between these two by investing in balanced mutual funds on Moneyfy. Also called hybrid mutual funds, these opportunities typically have a debt to equity ratio of 40% to 60%. In simpler terms, balanced mutual funds invest 40% of the corpus in debt instruments and 60% in equity. However, this ratio distribution can slightly differ for different balanced funds.
Sorting the right balanced funds can provide you with high returns whilst shielding your investment from market volatility. How? The corpus chunk invested in equity is relatively moderate to high risk and return, which is then balanced out by the 40% chunk invested in debt instruments.
All in all, balanced mutual funds provide you stability with a chance at earning great returns. So, if you're looking for significant capital appreciation and a stable income with low risk exposure, opt for balanced funds.
Sounds like something you want? Apply for this category of funds with just a click on Moneyfy. Our portal allows you to sort balanced funds by ratings, historical returns, minimum investment required, and much more. Use our advanced filter features to find the right balance of balanced funds.
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Balanced mutual funds are hybrid funds that serve two purposes. The first is to offer exposure to growth that protects your purchasing power by investing in equity. The second is to protect your money and bring in some balance by investing in debt. As the name suggests, a balanced fund balances out risk and returns, ensuring capital appreciation and safety against probable risk.
Balanced mutual funds are suitable for investors with mid to long-term financial goals and a low-risk appetite. While these funds offer growth and help to counter inflation because of the equity component, they do not add too much volatility that can be stressful or hard to handle for risk-averse investors.
They can also be a stepping stone for novice investors who are hesitant to invest directly in equity funds.
Taxation on Balanced Funds
Tax on balanced mutual funds is determined on the basis of the fund’s allocation. If the fund has at least 65% of its assets invested in equity and equity-related securities, they are taxed as equity funds. On the other hand, if the balanced fund invests most of its assets in debt securities, it is taxed as a debt fund. Here’s how each of these is taxed:
Equity Balanced Mutual Funds:
Hybrid funds held for a year or more are taxed as long-term capital gains at 10% on gains exceeding Rs 1 lakh
Hybrid funds held for less than a year are taxed as short-term capital gains at 15%
Debt Balanced Mutual Funds:
Hybrid funds held for three years or more are taxed as long-term capital gains at 20% with indexation
Hybrid funds held for less than three years or more are taxed as short-term capital gains at the prevailing income tax slabs
Balanced Returns
By investing in equity and debt in a hybrid manner, investors get steady returns and controlled risk, thereby balancing their returns.
Tax Benefits
Shifting between equity and debt funds can typically trigger tax liabilities. However, the jump from debt to equity within a balanced fund does not attract any tax.
Diversification
Balanced mutual funds offer the perfect blend of debt and equity in the portfolio, automatically diversifying the portfolio. Since the asset allocation of these funds is dynamic, investors get to make the most of the prevailing market opportunities.
Hedge Against Inflation
The equity component of a balanced fund protects investors from rising prices by delivering returns in tandem with inflation. Additionally, the debt component provides a hedge against inflation.
Suitable for Beginners
A balanced fund is managed by a professional fund manager who makes all critical buying and selling decisions. Beginners lacking market expertise can leverage the professional’s acumen and earn profits.
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