Top balanced funds for first-time investors

The balanced fund category of mutual funds has seen assets surge from Rs 50,000 cr to Rs 1,20,000 cr in the last one year. Regular monthly dividend payout, higher returns from stock market and tax efficiency have led to increased flows from investors–including first-time investors -to this category. Balanced funds invest in a mix of equities and bonds. But they usually invest at least 65% in equities to be categorised as an equity product for tax purposes. Wealth advisors say first-time investors would be better off allocating incremental money to this category. ET takes a look at five balanced funds whose assets under management (AUM) have surged past Rs 10,000 crore.

HDFC Prudence Fund | AUM: Rs 29,169 crore
FUND MANAGER: Prashant Jain
3 year return: 11.19% | 5 year return: 17.62%
TOP 3 STOCKS: SBI, ICICI Bank, Infosys

The largest balanced fund in the country, it has been managed single handedly by Prashant Jain for 23 years, since its inception. As this fund changed the dividend payout frequency to monthly since Feb 2016. On a average, the fund has higher equity exposure compared to its peers and hence is meant for aggressive investors. It adopts a multicap approach with a mix of large and midcap stocks. In the debt component the fund capitalised on the rate cuts by holding long tenure bonds. The fund manager has positioned the portfolio to benefi t from an economic recovery and is bullish on corporate banks making it a good choice for investors with a fi ve year plus time frame.

HDFC Balanced Fund | AUM: Rs 13,824 crore
FUND MANAGER: Chirag Setalvad
3 year return: 14.35% | 5 year return: 18.99%
TOP 3 STOCKS: HDFC Bank, L&T, Reliance

With a slightly conservative approach, this fund maintains a steady-state asset allocation. Over the years, it has avoided both cash calls and changes in allocation. Playing midcap stocks on valuations has been the key to higher returns in comparison to its peers. The debt portion is invested mainly in high quality corporate bonds, with longer durations to make the most of falling interest rates. It pays a quarterly dividend and is one of the most consistent performers, outperforming its category average over 1, 3, 5 and 10 year time frame. Many fi nancial planners recommend this to fi rst time investors instead of pure equity funds.

ICICI Prudential Balanced Fund
AUM: Rs 16,394 crore | FUND MANAGERS: Atul Patel, Manish Banthia & S Naren
3 year return: 13.85% | 5 year return: 19.13%
TOP 3 STOCKS: ICICI Bank, SBI, Bharti Airtel

The fund managers adopt a contrarian approach in the equity portfolio with a strategy to capitalize on a turnaround in the earning cycle. Stocks from telecom, PSU banks, IT and pharma which are out of favour are there in the portfolio. On the debt side, the portfolio consists of govt securities and bonds with more than AA ratings. It pays a monthly dividend and has beaten category average over the time frames of 1 year, 3 year, 5 year and 10 years. Investors with moderate risk appetite
and time frame of 3 years plus could consider this fund.

Aditya Birla SL Balanced 95 Fund
AUM: Rs 10,148 crore | FUND MANAGERS: Dhaval Shah, Mahesh Patil and Pranay Sinha
3 year return: 14.58% | 5 year return: 17.98%
TOP 3 STOCKS: HDFC Bank, ICICI Bank, Infosys

The fund allocates 60- 75% to equities. The fund predominantly invests in large-caps. The portfolio is well diversifi ed and exposure to individual stocks is limited to 2-3% of the portfolio, leaving the equity portfolio with a long tail. Banking, tech and healthcare are the top three sectors constituting almost half of the equity portfolio. The fund managers prefer to play it safe on the debt component staying invested only in government securities and AAA rated paper. The fund pays quarterly dividend.

SBI Magnum Balanced Fund
AUM: Rs 13,487 crore | FUND MANAGER: Dinesh Ahuja and R Srinivasan
3 year return: 12.6% 5 year return: 18.38%

The fund managers maintain a multicap equity portfolio with a tilt towards largecaps. Midcap stocks are added as and when the fund managers spot opportunity to generate extra returns. In addition to govt bonds and AAA rated paper, the fund managers don’t not hesitate to take exposure to AA and above rated papers intending to generate high yields. This portfolio approach has generated good returns for the scheme and has beaten its category average over 3, 5 and 10 year periods. The fund pays quarterly dividends.

Leave a Reply

Your email address will not be published.

thirteen + one =