Mutual funds are widely held and most popular form of investment option nowadays. The balanced fund is one of the various types of mutual fund option available in the market. Balanced funds are an appropriate option for the first-time investors who are not ready for risky investments but yet desire for capital appreciation. Balanced funds are best-known crossbreed funds which are a blend of debt and equity and automatically diversify the group of stocks in the ratio of 60% stocks and rest of the balance 40% in bonds and sticks strictly to that allotment. It is a type of investment best suited to people close to retirement because it involves a very low-risk investment approach, Balanced Mutual Funds Advantages and Disadvantages
Balanced Funds Include Several Advantages and Disadvantages to the Investors Which Are as Follows.
- It is best suited to first-time investors who have very little knowledge of fund management. All the funds are managed by experienced and skilled professionals who keep an eye on the market and take the best suitable course of investment. So you don’t have to worry about the purchase and selling of the stocks.
- Balanced funds are such an investment option that permits the investor to take systematic withdrawals although upholding appropriate asset allotment is best suitable for people close to retirement.
- The Balanced fund is designed well and is appropriate for small investors who are ready to put in a small amount of their monthly income for investment.
- Balanced Funds are a cost-effective option to diversify the funds among different options of stocks and bonds. It is a hassle-free solution for investment where one doesn’t have to analyze and select each and every fund separately rather the investor gets a single fund portfolio which is further diversified.
- The balanced funds offer a reduced risk investment portfolio acquired with the help of diversifying funds. The funds are invested in various different securities and bonds. The various stock positions help to reduce the risk to a great extent.
- The investors have no authority over the choice of funds. They cannot make decisions like how much investment in what sort of bonds or stocks like corporate or government bonds; stocks such as a large cap or small cap. All such decisions are taken by the professionals who handle the fund.
- A lot of investors believe that balanced funds are a riskless investment option, whereas that’s not completely true, they are not completely risk-free rather they are less volatile and have their own chances of risk.
- Occasionally the fee of balanced funds might be very high as compared to individual funds because the professional team who handles the funds does the work of choosing the combination of bonds and stocks and altering according to requirement.
- Investors who hold a specific class of funds can move few of their resources to different mutual funds for the purpose of wealth creation or may be tax planning. Though this is not possible with balanced funds because similar mutual funds hold both bonds and assets.