Moneycontrol
Last Updated : Mar 05, 2018 03:54 PM IST | Source: Moneycontrol.com

Best balanced mutual funds for your portfolio in volatile markets

If you are long term investors and worried about highly volatile markets you can invest in these mutual fund schemes.


Suresh KP

We are seeing that stock markets are highly volatile after budgets 2018. This situation may continue now or markets may bounce back and stock markets may reach new high. While one cannot predict stock market direction, we can choose some of the best mutual fund scheme to invest in the volatile markets in 2018. Balanced mutual funds would work as defensive in the highly volatile markets which has proven in the past. Read the article for more details about it.

If mutual funds invest most of its money in stocks, then such mutual funds’ returns could be volatile based on stock market volatility. Balanced mutual funds would invest approximately 65% of the amount in equities and the balance in fixed income options like bonds, debentures and other fixed income investment options. With such strategy, the amount invested in equity would provide good growth in investment and amount invested in debt segment would provide stable and fixed returns.

Let me explain with an example why balanced mutual funds can work better in volatile markets.

A mutual fund scheme invests 65% in equity markets and balance 35% in fixed income options like debt instruments, fixed income options etc., Assume that the investment amount is Rs 1 Lakh and it invests Rs 65,000 in equity and Rs 35,000 in debt. Assume that the stock market has provided 15% returns in bull run and in bearish market it has provided only 6% returns.

In bull market, your investment would fetch you approx 12% returns (Rs 65,000 x 65% and Rs 35,000 x 6%).

In a bearish market, your investment would fetch you approx 6% returns.

The downside of risk is reduced if you compare the low returns in a bearish market. This way, it would be win-win situation in both situations.

We picked some mutual funds based on past returns, AUM more than Rs 100 crore and CRISIL ranking.

1) HDFC Balanced Fund

Funds objective: This fund aims to generate capital appreciation from a combined portfolio of equity and debt instruments. This scheme invests up to 60% in equity and balance in debt related instruments.

Why to invest: This fund has beaten its balanced funds category benchmark and provided 20% annualised returns in last 5 years and 18% returns in the last 1 year. This fund performed well in the last 8-10 years in high volatile market conditions. Moneycontrol-Crisil Ranks it as Rank-1. This fund out performed and provided 15% annualized returns in the last 10 years making it as unique fund among balanced funds.

2) L&T India Prudence Fund

Fund Objective: The fund scheme aims periodic returns and long-term capital appreciation from a balanced portfolio of debt and equity.

Why to invest: This is the second fund that has beaten its peers and provided 18% annualised returns in last 5 years and 16% returns in the last 1 year. In volatile markets this fund performed well compared to its peers.

3) ICICI Prudential Balanced Fund

Fund Objective: The scheme invests in equities and related securities as well as fixed income and money market securities. It invests 60% minimum in equity and balance in debt related instruments.

Why to invest: This is the 3rd fund that has beaten its balanced funds category benchmark and provided 18% annualised returns in last 5 years and 16% returns in the last 1 year. This fund has been consistenly performing well during stock market corrections and during volatile markets making it as unique mutual fund scheme. Moneycontrol-Crisil Ranks it as Rank-2. If you are moderate risk taker and willing to invest for medium to long term, you can invest in this fund.

4) Birla Sun Life 95 Balanced Fund

Fund Objective: This fund invests upto 60% in equity and balance in debt related instruments.

Why to invest: This is the 4th fund that has beaten its balanced funds category benchmark and provided 17% annualised returns in last 5 years and 19% returns in the last 1 year. This fund has performed well in the long run of 10 years where it provided 12% annualized returns. Moneycontrol-Crisil ranks it as Rank-3. Many of us might be still investing for more than 10 years as this is well known fund.

5) HDFC Prudence Fund

Fund Objective: The fund scheme aims periodic returns and long-term capital appreciation from a balanced portfolio of debt and equity.

Why to invest: This is the 5th fund that has beaten its balanced funds category benchmark and provided 17% annualised returns in last 5 years and 17% returns in the last 1 year. This fund has performed well in the long run of 10 years where it provided 14% annualized returns. Moneycontrol- Crisil ranks it as Rank-3. In the last few volatile market situations, this fund performed well compared to its peers making it as unique fund among balanced funds category.

Who should invest in these funds?

If you are long term investors and worried about highly volatile markets you can invest in these mutual fund schemes. Also moderate risk takers can invest in these funds for medium to long term of 5-10 years. While the returns indicated above are based on past trend and not guaranteed in future, one can expect approx. 11% to 13% annualized returns in mutual fund schemes if they can invest for long term.

The author of this article is founder of Myinvestmentideas.com. He can be reached at suresh@myinvestmentideas.com for any clarifications or queries about the article.
First Published on Feb 22, 2018 03:12 pm
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