Now a days, Fixed Deposit interest rates are going down so does not seem to be an attractive investment option. So, investors are looking for other alternatives. They are looking at Balanced Funds as an alternatives.
Balanced funds, which are often called hybrid funds, own both stocks and bonds. They earn the “balanced” moniker by keeping the balance between the two asset classes pretty steady, usually placing about 60% of their assets in stocks and 40% in bonds.
They should keep in mind following points before investing in Balanced Funds.
1. Equity Allocation : Balanced Funds invest more than 65% in equity Asset Class. Equity comes with volatile nature. In shorter duration, you can see your portfolio in red.
2. Investment Horizon : Your investment horizon should be more than 3 to 5 years.
3. Taxation : According to current taxation rules, Balanced funds are taxed like equity funds. So upto 1 year Short Term Capital Gains tax of 15% on Capital Gains. Post 1 year, there is no tax applicable.
4. Debt Allocation: Upto 35% allocation to debt asset class. No taxation on this allocation. It is like tax free fixed income investment post 1 year of holding.
5. Dividends: Monthly Dividends are available.
Please go through following video to get a complete idea about Balanced Funds.
Following are few Balanced Fund Examples:
1. ICICI Prudential Balanced Fund
2. HDFC Balanced Fund
3. HDFC Prudence Fund
4. Aditya Birla Sun Life Balanced 95 Fund