Most times making a choice between debt and equity proves to be a difficult decision. To overcome this problem, most professionals’ advice that an investor should invest keeping their age & the current market conditions in mind.
However, if you are looking for diversification of your investment portfolio, that you can rebalance regularly, you can opt for hybrid or balanced funds. These funds give you the option of investing in a combination of debt and equity.
The main aim for these funds is to give an investor, the best of both worlds. But why one should invest in balanced funds, let’s evaluate a few points:
- The primary advantage of
balanced funds is to achieve diversification. The fund manager takes care of the asset allocation, as they rebalance the fund on the basis of need. These are the best for those investors who want to benefit from the stock market but don't have the heart for volatility. All sorts of investors should have some part of their investments in balanced funds.
- The most necessary advantage of investment in a balanced fund is to make sure of a fascinating asset allocation, that is insulated from sudden euphoria or panic situations that usually investors are generally susceptible to. Balanced funds have evidenced their worth time and again and rewarded investors with decent returns and stability. The returns might not be as flashy as diversified equity funds, however balanced funds are the last word vehicle for long-run growth for conservative investors. They will prevent from jolty rides and guarantee a soft landing.
- The other advantage is in terms of the risk-adjusted returns that a balance fund offers. There are instances of equity-oriented balanced funds outperforming, even equity funds, that is incredibly important, considering that an equity-oriented balanced fund can maintain 30-35% allocation to debt investments. There are often some explanations for that. One being that the fund manager is aggressive on the equity portion and includes a significant mid-cap and small-cap exposure. Also, it may be a measure of the stock choosing and portfolio management capabilities of the fund manager.
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