1. The idea behind a balanced equity fund is to provide a ready-made solution to investors and to avoid the hassle of periodical re-balancing of asset allocation.
2. They are, therefore, most suitable for those investors who are new to the mutual fund industry and want a long-term equity-oriented portfolio.
3. Balanced equity funds are also generally aimed at investors looking for capital appreciation and safety during wealth creation.
4. Its fund manager achieves some stability through the debt portfolio, while the equity part gives the chance for capital appreciation over the longer term.
5. They are, therefore, the ideal investment vehicle for investors with moderate risk profile.
6. Therefore, balanced equity funds are suitable for:
a) First-time equity investors who lack the risk appetite for pure equity.
b) First-time equity investors, whose Section 80C investment needs have already been met via fixed-income and insurance products.
c) Those who are unlikely to adhere to asset allocation because they lack discipline or find it difficult to invest time and effort in direct equities or riskier mutual funds.
7. A balanced equity fund is advantageous because:-
a) It eliminates the efforts otherwise needed to invest individually in stocks, debt, money market instruments and gold.
b) It also eliminates the need to keep track of investments and periodic re-balancing to maintain a mix that suits one's risk profile.
c) It provides investors with a single-point investment avenue that combines both growth and income objectives.
d) The debt exposure ensures stability of income whereas the equity portion provides appreciation when the stock market rises.
e) The mandated asset allocation between equity and debt also ensures that there is an automatic asset re-allocation.
f) It eliminates the risk of imperfections of investment, decision-making and market-timing caused by investor sentiments and psychology.
g) It enables a natural diversification within the same scheme and brings in stability by balancing out one type of market movement with the others.
h) The fund manager’s ability to re-balance the equity and debt allocation helps investors as they need not maintain separate portfolios for equity and debt.
8. If the portfolio allocation goes haywire, the fund manager re-balances it, thus saving the investors from incurring brokerage, etc if they were to do it themselves in direct equities.
9. This auto-switching in a balanced equity fund also makes investing in it more tax-efficient for investors as they do not need to pay any capital gains tax when the fund manager moves the investment from one asset class to the other himself.
10. While all dividends and long-term capital gains above 1 lakh annually will be taxed at 10% in the hands of investors now, the income from the debt component of a balanced fund still remains tax-free in the process, which is otherwise not possible in any other way.
11. For long-term aggressive investors, a multicap fund can serve well too.
12. SIPs, spread over a few years without "timing" entry or exit, remain the best method for allocating lumpsum investment for long-term wealth creation as it removes the element of greed.
13. Long-term SIP investment in 2/3 top-ranked balanced funds of different AMCs should suffice.
14. For portfolio building, one of them could be a multicap fund.
15. An aggressive investor should opt for a midcap/smallcap fund SIPs only for a specific long-term need-based goal, if any, with active periodic review / rebalancing.
2. They are, therefore, most suitable for those investors who are new to the mutual fund industry and want a long-term equity-oriented portfolio.
3. Balanced equity funds are also generally aimed at investors looking for capital appreciation and safety during wealth creation.
4. Its fund manager achieves some stability through the debt portfolio, while the equity part gives the chance for capital appreciation over the longer term.
5. They are, therefore, the ideal investment vehicle for investors with moderate risk profile.
6. Therefore, balanced equity funds are suitable for:
a) First-time equity investors who lack the risk appetite for pure equity.
b) First-time equity investors, whose Section 80C investment needs have already been met via fixed-income and insurance products.
c) Those who are unlikely to adhere to asset allocation because they lack discipline or find it difficult to invest time and effort in direct equities or riskier mutual funds.
7. A balanced equity fund is advantageous because:-
a) It eliminates the efforts otherwise needed to invest individually in stocks, debt, money market instruments and gold.
b) It also eliminates the need to keep track of investments and periodic re-balancing to maintain a mix that suits one's risk profile.
c) It provides investors with a single-point investment avenue that combines both growth and income objectives.
d) The debt exposure ensures stability of income whereas the equity portion provides appreciation when the stock market rises.
e) The mandated asset allocation between equity and debt also ensures that there is an automatic asset re-allocation.
f) It eliminates the risk of imperfections of investment, decision-making and market-timing caused by investor sentiments and psychology.
g) It enables a natural diversification within the same scheme and brings in stability by balancing out one type of market movement with the others.
h) The fund manager’s ability to re-balance the equity and debt allocation helps investors as they need not maintain separate portfolios for equity and debt.
8. If the portfolio allocation goes haywire, the fund manager re-balances it, thus saving the investors from incurring brokerage, etc if they were to do it themselves in direct equities.
9. This auto-switching in a balanced equity fund also makes investing in it more tax-efficient for investors as they do not need to pay any capital gains tax when the fund manager moves the investment from one asset class to the other himself.
10. While all dividends and long-term capital gains above 1 lakh annually will be taxed at 10% in the hands of investors now, the income from the debt component of a balanced fund still remains tax-free in the process, which is otherwise not possible in any other way.
11. For long-term aggressive investors, a multicap fund can serve well too.
12. SIPs, spread over a few years without "timing" entry or exit, remain the best method for allocating lumpsum investment for long-term wealth creation as it removes the element of greed.
13. Long-term SIP investment in 2/3 top-ranked balanced funds of different AMCs should suffice.
14. For portfolio building, one of them could be a multicap fund.
15. An aggressive investor should opt for a midcap/smallcap fund SIPs only for a specific long-term need-based goal, if any, with active periodic review / rebalancing.