It has been a chequered year for balanced mutual funds with the category average quoting far below the Crisil Balanced Fund Index.
However, with the basket a few like HDFC Prudence Fund, Birla Sun Life 95 Fund, DSP BlackRock Balanced Fund and HDFC Balanced Fund have put up a sterling show.
HDFC Prudence Fund has given 16.55 per cent returns over the past one year till April 15 compared with 9 per cent return on the Crisil Balanced Fund Index while the category average stood at 6.85 per cent. Birla Sun Life 95 Fund gave a return of 12.50 per cent, DSP BlackRock Balanced Fund earned 10.47 per cent and HDFC Balanced Fund gave 16.95 per cent in the same period.
“Equity markets are volatile and G-Sec yields are at their structurally upward trend. Hence, balanced funds may not yield good returns in the near term,” brokerage ICICI Securities said in a note.
Balanced funds have more than 65 per cent invested into equities. Hence, they offer tax savings as any capital gain over a one-year period becomes tax free. Therefore, even the 35 per cent debt portion is not subjected to tax.
However, the return gets reduced over diversified peers owing to the debt component. Even in downward trending equity markets, well performing diversified funds have the capability to outperform balanced funds.
“Investors with a limited investible surplus and a lower risk appetite but with a willingness to invest into equities can look to invest in these funds,” the broking house said.