As name itself describes, A balanced fund is a combination of equity, bond and sometimes a money market component in a single portfolio. If you have dual investment objectives, a balanced fund is an ideal choice. Typically, investors such as retirees, or investors with low-risk threshold, invest in these funds to gain a handsome profit and for the safety of their investments. Even if you want to reduce your taxable income, you can invest in these funds as most of these funds have equity allocation of more than 60 %. If you are an amateur investor and want to learn how the market works, a balanced fund is ideal for you. It has a lower risk than equity funds and a higher profit return than a debt fund.
The advantages of a Balanced Fund
The first advantage is that you can switch from one fund to another with more growth oriented stocks when the market is bullish (positive) and vice versa.
The balanced fund you buy is a perfect blend of the top stocks and bonds, for income as well as safety.
These funds reduce your involvement in asset management of your portfolio. They have it all, and dilute your burden of managing your investments.
Balanced funds usually invest more than 60% of their money in the equity market, and so are treated as equity funds for taxation purposes. Even the other asset classes are taxed like equity.