What is difference between hybrid fund and balanced Advantage fund?
What Are Balanced Funds? Balanced funds are also known as hybrid funds. This type of fund gives the option of diversifying your portfolio, which enables you to benefit from both equity and debt funds. These mutual fund types consist of a bond component along with a stock component.
All hybrid funds allocate the fund assets to equities and debt securities in a fair ratio but they may be bent towards one asset class by a higher percentage of investments. On the other hand, balanced funds allocate the fund corpus to both asset types in a balanced ratio.
Balanced funds are financial instruments that invest in a mixture of both debt and equity segments in specific ratios. Also known as hybrid funds, these funds enable investors to diversify their mutual fund-based portfolios.
Any mutual fund scheme that invests in stocks can't be safe. It also cannot avoid volatility. So, invest in balanced advantage funds only if you can tolerate the risk of investing in stocks. Also, invest only if you have an investment horizon of at least five years.
Difference Between Balanced Advantage Funds and Balanced Funds. A Balanced Advantage Fund primarily adjusts equity exposure on the basis of overall market valuations (expensive or cheap), whereas in the case of Balanced Mutual Funds, there is a pre-decided ratio of equity and debt investments.
- HDFC Balanced Advantage Fund.
- ICICI Prudential Balanced Advantage Fund.
- Nippon India Balanced Advantage Fund.
- Aditya Birla Sun Life Balanced Advantage Fund.
- Principal Balanced Advantage Fund.
- Edelweiss Balanced Advantage Fund.
- Invesco India Dynamic Equity Fund.
- L&T Dynamic Equity Fund.
Conservative investors looking for long-term capital growth at reasonable risk could consider investing in Balanced Advantage funds. It offers a dynamic solution with the right asset mix of equity and debt portion. Bear in mind, you have a minimum investment horizon of 3 years and moderately high-risk appetite.
Even though hybrid funds are considered riskier than debt funds, they are safer than equity funds. They offer better returns and lower risks. They are considered a good option for new investors who are uncertain about the market, as they provide stability even while testing the equity market's volatility.
This type of fund gives optimum returns in the long term. So, investors with intermediate to long-term horizons (5-10 years) should invest in them. Investors with long-term goals such as retirement funds, or medium-term goals such as modest capital accumulation with a revenue source can consider balanced funds.
Who should invest in a Hybrid Mutual Fund? Hybrid funds are considered to be riskier than debt funds but safer than equity funds. They tend to offer better returns than debt funds and are preferred by many low-risk investors.
Is balanced Advantage fund risky?
Relatively Lower risk
As the fund portfolio has lesser exposure to the vagaries of equity markets, the risk of capital erosion is relatively lower, thereby making balanced advantage mutual funds a good bet if your risk tolerance is moderate.
Since the portfolio is adjusted on a regular basis, experts feel that it is absolutely safe to invest a lumpsum in such kind of a scheme. “It is absolutely fine to invest a lumpsum in dynamic asset allocation mutual fund schemes in current market situations,” says Gunwani.
MFDs and RIAs currently do not favour lumpsum investment in equity-oriented funds and are advising their clients to look at hybrid funds like balanced advantage funds. Of the six leading MFDs and RIAs we contacted, four of them said they won't recommend lump sum investment in equity funds due to high valuations.
1. Current NAV: The Current Net Asset Value of the HDFC Balanced Advantage Fund as of Sep 01, 2022 is Rs 29.70 for IDCW Monthly option of its Regular plan. 2. Returns: Its trailing returns over different time periods are: 18.75% (1yr), 17.79% (3yr), 11.33% (5yr) and 18.01% (since launch).
Balanced advantage funds are a type of hybrid funds that invest in both, equities and debt but do not have any restrictions on asset allocation. There is no set minimum and maximum threshold for exposure to a particular asset class. These funds can also change their asset allocation as per the market conditions.
Hybrid Funds are mutual fund schemes which invest in more than one asset class i.e. equity, debt and other asset classes depending on the investment objective of the scheme. These funds invest in a mix of different asset classes to diversify the portfolio with an aim to minimise the risk involved.
Balanced Advantage Funds are good for conservative investors who are looking to generate higher returns than debt with limited risk. However, HDFC Balanced Advantage Fund is managed more aggressively than its peers and does not use derivatives to reduce its equity exposure below 65% of the corpus.
As you can see ICICI Prudential Balanced Fund, DSP BlackRock Balanced Funds, Reliance Regular Savings Fund Balanced option, L&T Prudence Fund and HDFC Prudence Fund are some of the top performing balanced funds which pays monthly dividends as well.
| Fund Name | Category | Risk |
|---|---|---|
| Axis Arbitrage Fund | Hybrid | Low |
| HSBC Overnight Fund | Debt | Low |
| Mahindra Manulife Arbitrage Yojana Fund | Hybrid | Low |
| Mirae Asset Overnight Fund | Debt | Low |
Current NAV: The Current Net Asset Value of the SBI Balanced Advantage Fund - Regular Plan as of Aug 22, 2022 is Rs 10.39 for Growth option of its Regular plan. 2. Returns: Its trailing returns over different time periods are: 4.66% (since launch).
How much should I invest in SBI balance Advantage fund?
Exit Load: SBI Balanced Advantage Fund - Regular Plan shall attract an Exit Load, "For units in excess of 10% of the investment,1% will be charged for redemption within 1 year." 6. Minimum Investment: Minimum investment required is Rs 5000 and minimum additional investment is Rs 1000. Minimum SIP investment is Rs 500.
However, Balanced Advantage Funds are structured in a manner where the fund moves between two asset classes as a part of their routine rebalancing. It is not liable for taxes.
| Scheme Name | Expense Ratio | 3Y Return (Annualized) |
|---|---|---|
| ICICI Prudential Multi Asset Fund | 1.19% | 22.0% p.a. |
| Kotak Equity Hybrid Fund | 0.64% | 21.79% p.a. |
| Kotak Multi Asset Allocator FoF - Dynamic | 0.13% | 20.44% p.a. |
| HDFC Balanced Advantage Fund | 0.97% | 19.58% p.a. |
...
What is the difference between these three funds?
| Equity Funds | Debt Funds | Hybrid Funds |
|---|---|---|
| These funds are very risky. | These funds carry low levels of risk. | These funds carry moderate levels of risk. |
- Conservative Hybrid Funds. Let's start with the most cautious of all hybrid funds, Conservative Hybrid. ...
- Balanced Hybrid Funds: ...
- Aggressive Hybrid Funds. ...
- Dynamic Asset Allocation Fund / Balanced Advantage Funds. ...
- Multi-Asset Allocation Funds. ...
- Arbitrage Funds. ...
- Equity Savings Funds.
Balanced funds are also known as hybrid funds. This type of fund gives the option of diversifying your portfolio, which enables you to benefit from both equity and debt funds. These mutual fund types consist of a bond component along with a stock component.
| Mutual fund | 5 Yr. Returns | 3 Yr. Returns |
|---|---|---|
| Edelweiss Balanced Advantage Fund - Direct Plan - Growth | 11.72% | 15.32% |
| Mirae Asset Hybrid - Equity Fund - Direct Plan - Growth | 12.39% | 14.3% |
| SBI Equity Hybrid Fund - Direct Plan - Growth | 12.41% | 14.2% |
| UTI MUTUAL FUND - Direct Plan - Growth | 9.32% | 13.98% |
Balanced funds are suitable for a medium-term horizon and are ideal for investors who are looking for a mixture of safety, income and modest capital appreciation. The amounts this type of mutual fund invests into each asset class usually must remain within a set minimum and maximum.
| Fund Name | Category | 3 Year Returns |
|---|---|---|
| Axis Bluechip Fund | Large-Cap Equity | 23.50% |
| Mirae Asset Large Cap Fund | Large-Cap Equity | 22.30% |
| Parag Parikh Flexi Cap fund | Diversified | 31.40% |
| Invesco India Growth Opportunities Fund | Diversified | 19.9% |
...
Top Performing Hybrid Funds for Investment.
| ICICI Prudential Equity and Debt Fund Growth | |
|---|---|
| NAV | ₹232.51 ↑ 0.70 (0.30 %) |
| Net Assets (Cr) | ₹19,614 |
How hybrid mutual funds are taxed?
Tax on Gains The equity component of hybrid funds is taxed like equity funds. Long-term capital gains over Rs. 1 lakh on equity component are taxed at the rate of 10%. Short-term capital gains (STCG) on equity component are taxed at the rate of 15%.
| Fund Name | 3 Year Returns | Lock-In |
|---|---|---|
| IDFC Tax Advantage ELSS Fund | 20.8% | 3 Year |
| Canara Robeco Equity Tax Saver fund | 20.20% | 3 Year |
| Parag Parikh Tax Saver Fund | 22.10% (Since Inception) | 3 Year |
| Mirae Asset Tax Saver Fund (G) | 19.2% | 3 Year |
What are Hybrid Aggressive funds? Aggressive Hybrid Funds or Equity Oriented Hybrid Funds are hybrid mutual fund schemes with a larger allocation to equity or equity related securities. Hybrid schemes invest in multiple asset classes, primarily equity and debt.
A balanced fund combines equity stock component, a bond component and sometimes a money market component in a single portfolio.
Conservative Hybrid Funds are hybrid mutual funds that invest 75% to 90% of their total assets in debt instruments, and the rest 10% to 25% in equity. It is prefixed with conservative because a majority of its assets are invested in debt securities, which are considered to be highly safe avenues.
