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Best Balanced Mutual Funds 2019 – Top 10 Hybrid Mutual Funds

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Investing in hybrid/balanced mutual funds is the best way to diversify one’s mutual fund portfolio. Hybrid funds invest in both debt and equity instruments, and you enjoy the benefit of realising maximum returns from both the segments. Hybrid funds ensure capital appreciation and fight against the potential risk. This article covers the following:

1. Understanding Best Balanced Mutual Funds

Balanced a.k.a. hybrid mutual funds are a one-stop investment option that invests in both equity and debt segments. The main intention of hybrid funds is to balance the ratio of risk-reward and optimising the return on investment.

Top mutual funds invest about 50% to 70% of the portfolio in equities and the rest in debt instruments. Typically, hybrid funds are equity-oriented. First-time equity investors can consider hybrid mutual funds as a viable option. This is an excellent option for those investors who want maximum capital appreciation while taking a minimal risk.

2. Advantages of Best Balanced Mutual Funds

Best balanced mutual funds offer diversification in the form of a single docket of a mutual fund. An investor, thus, needs to go through the hassle of analysing and selecting a bouquet of funds. A fund manager can do this job for investors.

A strategical mix of debt with equity components make the funds less vulnerable to market volatility. Equity components of the fund can generate capital appreciation, while debt components shield the investment from volatility.

3. Disadvantages of Best Balanced Mutual Funds

Like any other investment option (apart from the government-backed schemes), hybrid mutual funds are not entirely risk-averse. In case of a direct investment across several stocks and debt instruments, one can relocate the resources among different funds, and this diversifies the assets for tax planning as well as wealth creation. However, you cannot customise diversification as the decision of resource allocation is with the fund manager.

4. Tax Implications

a. For equity-oriented balanced funds

All mutual funds with an equity exposure of more than 65% usually come under equity asset class for taxation purpose. So, there is a 15% tax on short-term capital gains (STCG), i.e. the gains booked with one year of the equity-oriented balance. If you hold these funds for more than 12 months, then a tax at the rate of 10% on long-term capital gains (LTCG) is applicable if the gains exceed Rs 1 lakh.

b. For debt-oriented balanced funds

Debt-oriented hybrid funds come under the family of debt funds for taxation purpose. The LTCG tax is applicable if the funds are held for more than 36 months. The STCG is taxed at 20% with indexation benefits. In other words, equity-oriented balanced funds have a clear tax advantage over debt funds.

5. Better Risk-Based Returns

Best balanced mutual funds have offered better risk-adjusted returns in the long run compared to equity returns. A comparison is given below.

Fund Category

5-year rolling return

Risk-based Std. deviation

Balanced funds

13.20%

2.9

Large-cap funds

12.90%

3.47

Mid-cap and large-cap funds

13.96%

3.82

Diversified funds

14.91%

3.96

6. How Best Balanced Mutual Funds are Ranked

The following table shows the best balanced mutual funds in India based on the past three years returns. You may choose the funds based on a different investment horizon or include other criteria such as financial ratios as well.

Balanced Fund Name

3 Years

ICICI Prudential Equity and Debt Fund – Direct Plan Growth

11.04%

Mirae Asset Hybrid – Equity – GrowthAggressive Hybrid Fund

10.77%

Principal Hybrid Equity Fund – GrowthAggressive Hybrid Fund

10.64%

SBI Equity Hybrid Fund – Regular Plan – GrowthAggressive Hybrid Fund

9.51%

*This is a representative list based on key metrics as of May 29, 2018. It does not serve as a recommendation of funds, nor does it claim to the only correct way to rank funds. Interest rates mentioned are CAGR. Related articles on Balanced Mutual funds: