Mutual Funds Aid During Choppy Times HOW

Mutual funds are a great way in reducing the risk which an investor is exposed to in the very dynamic economics of today’s times. Mutual funds have different specifics when it comes to investment and hence it becomes critical to choose one carefully. In the erratic economic times of today, the type of funds which have done the most are ones which have a diverse and balanced assets base. The mix consists of a balanced mix of stocks and bonds.
 
The What:
 
In times when the market is bullish tax efficient mutual funds make sense since they enable the investor to save on the capital gains tax. However, in volatile markets people do not care much for tax with unstable returns. Continuing global concerns and dismal results from corporate sector has meant uncertain stock market with trying times for equity funds. Hence, the balance mix funds have been the biggest gainers in the past year. The idea right now is to invest for long term. Investors would be well advised to review the outlook on funds if the scrips they are invested in have a change in fundamentals.
 
The Gain:

The schemes have almost one third invested in debt. Further, the balanced returns as compared to the more regular mutual funds also mean that a large amount of capital will get drawn to these funds and thereby improve chances of higher returns. These funds are also tax efficient since they are considered as equity funds for taxation purposes and the debt component is shielded from taxation as well.
 
Options:

There are number of funds which are an option such as the HDFC Balanced fund which currently offers returns of around 18%. It has an equity exposure of around 70%. The things which have worked for it have been the government security bond exposures as well as recent shift to large cap stocks. ICICI Pru Balanced fund is another option which has an SIP of Rs. 1000 on a monthly basis translating to Rs. 7.3 lakhs in 15 years. It is offering a 17% average return.  A few accrual calls have gone its way. The strategy here has been to go for large caps which offer an average compounded growth rates above 15%. The TATA Balanced fund is also a great option with an expected return of 19.73% and a Rs. 1000 monthly SIP offering around Rs.9 lakhs in 15 years. The strategy here has been to go for good value paper and Government Issue instruments.

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