Definition: Balanced Funds also called as Hybrid Funds, invest in both the equities and the fixed income instruments. In other words, the funds that offer the investors an opportunity to buy a single mutual fund that yields the growth and income at the same time is called as the balanced funds.
The proportion of funds to be invested in equity and debt is predefined in the scheme and can be categorized as:
- Debt-Oriented funds: At least 65% of the funds are invested in the debt instruments while the remaining portion is invested in the equity segment. These funds are opted by those investors who are likely to take less amount of risk.
- Equity-Oriented Funds: At least 65% of the funds are invested in the equity segment while the remaining portion is invested in the debt instruments. Here, the investors are willing to take the moderate type of risk.
Thus, the balanced fund is the combination of several stocks and bonds, which is structured to balance the aim of achieving higher returns against the risk of losing money. The investment in stock offer the growth opportunities, while the investment in fixed income securities (bonds) stabilizes the portfolio during the fluctuations in the equity markets. These types of funds are designed for those investors who wants to minimize the risks in such investments.