Balanced Mutual Funds offer stability, tax advantage in choppy times

Balanced mutual funds, which invest in a mix of stocks and bonds, are finding favour with investors these days. Assets under management of these funds have doubled from Rs 18,277 cr in September 2014 to Rs 36,633 cr in September 2015. Wealth managers are recommending first-time investors to invest in this category as stocks trade at elevated valuations. These schemes invest up to 35% of their corpus in debt. While lower volatility in returns in balanced funds compared to plain vanilla equity schemes is drawing investors to this category, taxation is a bigger reason. Investors in the high tax bracket gain as these funds are treated as equity funds from a taxation perspective and the debt component automatically becomes tax free. Funds with at least 65% of their assets in stocks can be treated as equity funds. Prashant Mahesh looks at five balanced funds that have completed 15 years and manage assets of more than Rs 1,000 crore.