Balanced mutual funds, also known as hybrid funds, offer a perfect blend of growth and stability by investing in both equity and debt instruments. This dual approach allows investors to capture the growth potential of equity markets while maintaining stability through fixed-income securities. In 2024, as market volatility continues to fluctuate, balanced mutual funds are becoming increasingly attractive for those seeking a balanced risk-reward profile.
This article delves into the best balanced mutual funds for 2024, providing insights into how they work, why they are beneficial, and which funds are likely to deliver the best returns while minimizing risk.
Why Choose Balanced Mutual Funds?
Balanced mutual funds are ideal for investors who want a mix of growth and security. By investing in both stocks and bonds, these funds offer a lower risk profile compared to pure equity funds and better returns compared to debt funds. Here are some of the primary reasons to consider balanced mutual funds in 2024:
- Diversification
Balanced funds automatically diversify your portfolio by investing in both equity and debt instruments. This diversification reduces overall risk while allowing you to participate in the upside of the equity market.
- Stable Returns
While equity markets can be volatile, balanced funds have a cushion in the form of bonds or other debt securities. This bond component ensures that the fund delivers stable returns, even during market downturns.
- Risk-Adjusted Returns
The dual nature of balanced funds means they are less volatile than pure equity funds but still offer the potential for higher returns than fixed deposits or savings accounts. This makes them ideal for risk-averse investors seeking moderate growth.
- Better than Fixed-Income Instruments
Balanced funds tend to offer better returns than traditional fixed-income instruments like savings accounts or fixed deposits due to their exposure to equity markets, making them a better option for long-term wealth accumulation.
- Tax Benefits
Certain balanced funds that have a higher equity component (more than 65%) are treated as equity funds for tax purposes, which means investors can benefit from favorable long-term capital gains tax rates.
Types of Balanced Mutual Funds
There are several sub-categories of balanced mutual funds to choose from depending on your risk appetite and investment horizon:
- Aggressive Hybrid Funds: These funds allocate 65-80% of their assets in equities and the remaining in debt. They are suitable for investors with a higher risk tolerance.
- Conservative Hybrid Funds: These funds invest 75-90% of their portfolio in debt instruments and the rest in equity. They are ideal for conservative investors seeking capital protection with moderate growth.
- Balanced Advantage Funds (BAF): These funds actively manage the equity and debt ratio based on market conditions, making them a more dynamic option for investors looking for flexibility.
- Dynamic Asset Allocation Funds: Similar to BAF, these funds adjust the asset allocation between equity and debt depending on the market’s valuation, but they do not follow a fixed ratio.
Best Balanced Mutual Funds
Balanced mutual funds, also known as hybrid funds, invest in a mix of equity (stocks) and debt (bonds) to provide both growth and stability. They aim to balance the risks of equity exposure with the steady income from debt instruments, making them ideal for moderate-risk investors seeking long-term capital appreciation with lower volatility.
| Fund Name | NAV (₹) | Expense Ratio | Category | Fund Size (Cr ₹) | 5-Year Average Return |
|
ICICI Prudential Equity & Debt Fund Direct-Growth |
421.07 | 0.98% | Aggressive Hybrid | 40,090 | 18.64% |
| Quant Absolute Fund Direct-Growth | 466.25 | 0.70% | Aggressive Hybrid | 2,352 | 28.04% |
| UTI Aggressive Hybrid Fund Direct-Growth | 266.35 | 1.02% | Aggressive Hybrid | 13,293 | 12.45% |
| Kotak Equity Hybrid Fund Direct-Growth | 261.12 | 0.85% | Aggressive Hybrid | 13,218 | 12.70% |
| Invesco India Aggressive Hybrid Fund Direct-Growth | 83.78 | 0.87% | Aggressive Hybrid | 4,123 |
13.53% |
Conclusion
Balanced mutual funds strike a perfect balance between growth potential and capital protection, making them one of the most attractive investment options in 2024. With a diverse portfolio of equity and debt, they are well-suited to investors of all risk profiles—from aggressive investors looking for high returns to conservative investors focused on stability.
