Call Us

FOR EXISTING POLICY

Have query on premium, payout or any servicing need?

Call us:

1 860 266 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

Dedicated NRI Helpdesk:

+91 22 6251 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

FOR NEW POLICY

Want to buy a new policy online?

Call us:

+91 22 6984 9300

Give missed call for a call back:

+91 11 6615 8748

Monday - Sunday | 8 am - 11 pm IST


Exclusively for NRIs:

Call us:

Give missed call for a call back:

+91 11 4473 0242

Available All Days | 24 x 7

Language

Back Arrow Icon
Close Button
Back Arrow Icon
Close Button

Need assistance in choosing the right insurance plan? Get a call from our Expert.

Need assistance in choosing the right insurance plan?Get a call from our Expert.

+91 dropdown arrow

Select Plan dropdown arrow
  • Term plans
  • Saving plans
  • Wealth plans
  • Retirement plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

Balanced Fund: The Complete Guide

Image Of Balanced Fund Guide

27-07-2022 |

A mutual fund is a long-term investment tool that has good returns. It offers the benefit of professional management and diversification of portfolios. In a mutual fund, you can choose between equity and debt instruments according to your risk appetite and financial goals. .

Find out what a balanced fund is, its types and its benefits.



What is a Balanced Fund Definition?

A balanced fund is a type of mutual fund or a unit-linked insurance plan where investment is made in different assets in an adequate ratio. It ensures a balance between debt and equity in a single portfolio and offers a diversification of assets.

A balanced mutual fund involves low risks as it involves investment in both stocks and fixed income tools such as bonds and government securities. With an appropriate level of equity investment funds, fixed income tools give security during market downturns.



What is the Purpose of a Balanced Fund?

An equity investment fund consists of 85% of the assets invested in equity or stock. On the other hand, debt funds involve a similar percentage of assets invested in fixed income tools and bonds. This distribution of assets may not suit every investor. So, if you are looking for a more balanced ratio of assets, you may choose a balanced fund. Thus, the purpose of a balanced fund is to strike a balance between equity and debt.



What are the Types of Balanced Funds?

The different types of balanced/hybrid funds available in the market are as follows:

  • Equity-oriented balanced funds

    A balanced fund does not allocate assets in a typical 50:50 ratio. Instead, the investment is biased towards equity. So, balanced funds are usually equity-oriented, with more than 50% of assets invested in equity.

  • Debt-oriented balanced funds

    Debt-oriented funds are suitable for people with a low-risk appetite as they carry decreased risk. However, they offer returns that are not that much good as equity-oriented balanced funds. They invest a major part of their assets in debt-related securities.

  • Monthly investment plan

    While the equity-oriented balanced fund is skewed towards equity funds, the monthly investment plan (MIP) is biased toward fixed-income tools and bonds. Also called debt-oriented balanced funds, MIPs involve only 20-35% of assets in equity funds or less. Also, in MIPs, you can choose between monthly, quarterly, half-yearly or annual dividend payments.

  • Arbitrage funds

    Arbitrage funds are equity-oriented funds that use the arbitrage strategy. The investments are spread between future and spot prices of stocks in the derivative market and cash. The fund manager intends to benefit from the difference between these two markets. If profit opportunities are not present, the fund manager looks for money market instruments or cash/cash equivalents.


Benefits of Balanced Funds

Desktop Image Of Balanced Fund Guide

Here are the top benefits of balanced funds:

 

  • Diversification: Investment in the financial market must be diversified to generate high and stable returns. Balanced funds provide a well-diversified portfolio with both equity and debt in sufficient ratios. So, hybrid funds are less risky than pure equity funds with a perfect balance between assets.

  • Switching between funds: Balanced funds offer you the benefit of switching between equity and debt according to risk appetite and market volatility. So, if the market is bullish, you can switch toward equity and debt instruments when the market is bearish.

  • Income and safety: Balanced funds are a perfect combination of debt and equity, which helps generate stable income along with investment safety.

  • Professional management: The fund managers manage the portfolio and make necessary changes in the equity-debt ratio. When the market is bullish, they transfer funds from debt to equity and vice versa. So you do not have to worry about managing your portfolio while investing.

  • Tax benefits: The equity-oriented funds qualify as equity investment funds for tax*ation purposes. So, the capital gains on the equity-oriented balanced funds in India are tax*-free if held for more than one year. But if the gains in balanced funds held for more than one year exceed ₹1 lakh, they are taxed at 10%.

    In debt-oriented funds, if the fund is held for a period of more than 36 months, then long-term capital gains tax is levied. This can be at 20% with an indexation benefit. If held for less than 36 months, short-term gains tax is levied as per the tax bracket that you fall into.



ULIP Investment Balanced Funds

Unit-linked insurance plans involve investment in equity, debt or a hybrid of both. So, a ULIP plan is structured like a balanced or a hybrid fund where the premiums you pay are invested in equity and debt in pre-determined ratios. They offer flexibility to switch between stocks and debt according to market volatility and investment needs.



Who Should Invest In Balanced Funds?

A balanced fund is an ideal choice for investors having a low risk-taking ability. Investors who lack market experience can also gain from balanced funds.

So, individuals who wish to generate handsome returns along with investment security can opt for hybrid mutual funds. Also, if you want to gain from tax* benefits, balanced funds are a good investment option as equity investment is above 60%.


Things to Consider

Before you plan to invest in balanced mutual funds, you must consider the following things:

  • Analyse the objective of your investment.

  • Analyse your risk appetite and invest accordingly in equity-oriented funds or others.

  • Compare different funds based on their returns. So, select the funds that have a consistent performance.


Conclusion

Now you know the balanced fund’s meaning and how it works. So, if you are a novice investor, a retiree or aim for dual investments, a balanced fund is the perfect solution. With a diversified pool of assets, a balanced fund is founded on the perfect balance between equity and debt. It also balances the investment risks and returns in a proper manner.

ULIPs offer you the benefit of a life cover along with a balanced fund. With a professionally managed portfolio, you can stay relaxed with no need to build a diversified fund on your own. As you stay for a longer duration, you can switch between stock and debt based on your risk appetite. So, start investing in a ULIP plan with Tata AIA Life insurance and avail multiple tax* benefits. Also, you can choose between 11 fund options depending upon your risk tolerance.

L&C/Advt/2022/Jul/1652

Get complete protection at affordable cost & tax benefits

+91 dropdown arrow
  • +93 Afghanistan

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.


 

Looking to buy a new insurance plan?

Our experts are happy to help you!

+91

Select plan
  • Term plans
  • Saving plans
  • Retirement plans
  • Wealth plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in

People Like You Also Read

When You Must Terminate Life Insurance Policy?
Read More
Is The Income Tax Rate in India High?
Read More
How a Firm Digital Backbone is Transforming the Life Insurance Industry?
Read More
Term Insurance Plans for Smokers: The Detailed Guide
Read More
Advantages and Disadvantages of Life Insurance Policy
Read More
What are the Steps To Download PLI Statement Online?
Read More
EPFO Claim Status Online: The Complete Guide
Read More
ULIPs - Advantages and Disadvantages
Read More
Is The Surrender Value of ULIP Taxable? Everything That You Need to Know
Read More
4 Ways You Can Determine the Surrender Value of ULIP Funds
Read More

People Like You Also Read

When You Must Terminate Life Insurance Policy?
Read More
Is The Income Tax Rate in India High?
Read More
How a Firm Digital Backbone is Transforming the Life Insurance Industry?
Read More
Term Insurance Plans for Smokers: The Detailed Guide
Read More
Advantages and Disadvantages of Life Insurance Policy
Read More
What are the Steps To Download PLI Statement Online?
Read More
EPFO Claim Status Online: The Complete Guide
Read More
ULIPs - Advantages and Disadvantages
Read More
Is The Surrender Value of ULIP Taxable? Everything That You Need to Know
Read More
4 Ways You Can Determine the Surrender Value of ULIP Funds
Read More
Website Logo Image Icon

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Disclaimers

  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • IN THIS POLICY, THE INVESTMENT RISK IN THE INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER.

  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

  • Past performance is not indicative of future performance.

  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.

  • Please make your own independent decision after consulting your financial or other professional advisors.