In our last few posts in this series we had discussed how SIPs in best diversified equity funds, best mid and small cap funds, best ELSS Funds, best thematic funds and best large cap funds have created wealth for the investors in the long term.
While doing the above series, we thought of restricting our analysis to equity fund categories only as our belief was no other category can beat or match the returns of different equity fund categories. However, when we did this analysis for Balanced funds, we were surprised to find that the SIP returns of top performing Balanced were as good or even better (in some cases) as SIP returns of Large Cap Funds in the last 10 years. Let us look at the chart below –
SIP returns of Top Performing Balanced Funds
As seen in the above chart the annualised SIP returns (XIRR %) of top performing Balanced Funds were between 13 – 16% for the 10 year period. Now, let us see what the SIP returns from Large Cap Funds were during the same period.
SIP returns of Top Performing Large Cap Funds
As you can see in the above chart the annualised SIP returns (XIRR %) of top performing Large Cap Funds were also between 13 – 16% for the 10 year period.
Therefore, we can say that, in the long term there is hardly any difference as far as the SIP returns of Top Balanced and Large cap Equity Funds are concerned. And, it is the reason for doing this post for the benefit of our readers whose risk appetite may be moderate but they can still enjoy the equity like returns by investing in Balanced Funds through SIP mode.
What are Balanced Funds
Balanced Funds are excellent investment options for investors with moderate risk profile. These funds are hybrid funds, with 65 - 70% of the portfolio invested in equities and the rest in fixed income securities. In fact, investors who are unable to decide where to invest – Debt or Equity – the Balanced Funds could be best choice as they can generate excellent returns for the investors with limited downside risks.
Financial advisors suggest diversification of assets for building a good portfolio. Balanced funds help in this as it rebalances the allocation between equity and debt automatically according to the fund mandate. Therefore, investing in Balanced funds reduces the need to constantly move around funds as it auto rebalances the allocation.
The other advantage of Balanced Funds is that the taxation is like equity funds. That means, like equity funds, capital gains arising from investments in Balanced Funds held for over 12 months is tax free. Moreover, dividend received from Balanced Funds is also tax free like equity funds.
To learn more about Balanced Funds, I suggest our readers to go through these articles –
Can mutual fund balanced fund be your best bet
Investing in balanced funds versus a portfolio of equity and debt funds
Top and best 5 balanced mutual funds for investment in 2016
Why balanced funds may be the best investments for new mutual fund investors
For this study, we have selected 8 top Balanced Funds based on their 10 years SIP performance (Based on NAV of 12/7/2016). We have taken only one fund from one AMC. We want to reiterate that, by no means, it is a comprehensive list of the entire top performing Balanced Funds that gave good SIP returns in the last 10 years. Our objective is to show how long term investments in Balanced Funds have created wealth for the investors and how its returns are comparable to equity funds. Also, that it could probably be the best choice for moderate risk taking and new mutual fund investors.
The funds in our selection gave SIP returns ranging from 13 - 16% annualized. Since SIP investments are made over a period of time, the method of calculating SIP returns is different than that of Lump Sum investments. SIP returns are calculated by a methodology called XIRR, which is a variant of Internal Rate of Return (IRR). XIRR is similar to IRR, except XIRR can calculate returns on investments that are not necessarily strictly periodic.
For our study, we have assumed a monthly SIP of र 5,000 made on the 12th day of every month starting from August 2006 and ending on 12th July 2016. Therefore, the investor would have invested र 6.00 Lakhs through 120 instalments of र 5,000 each. We have taken Regular Plan – Growth option for this study and the data is as on July 12, 2016.
Now, we will analyze all the 8 funds selected for our study.
HDFC Balanced Fund was launched in September 2000. This marquee fund from HDFC Mutual Fund has a huge AUM base of nearly र 6,207 Crores (As on June 30, 2016). It is the one of the most popular and best performing Balanced Funds. Chirag Setalvad is the fund manager of this fund since 2007.
If you had started a monthly SIP of र 5,000 in HDFC Balanced Fund - Growth option, in August 2006, you would have accumulated a corpus of र 14.21 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual return of 16.66%. Check SIP returns of this fund.
The fund has got excellent rating from valueresearch i.e. 4 Star. CRISIL has also accorded a very good rating – Rank 2, in its recent mutual fund ranking for the quarter ending Mar 31, 2016.
The top 5 stocks that the fund is invested in are, Infosys, HDFC Bank, Reliance Industries, ICICI Bank and SBI. The 3 top sectors are Financial, Technology and Energy.
TATA Balanced Fund
TATA Balanced Fund
this is another marquee fund launched by TATA Mutual Fund in October 1995. This is the oldest fund in our study and has the highest AUM of र 6,280 Crores (As on June 30, 2016). It is one of the most popular and best performing Balanced Funds with a track record of more than 20 years. Akhil Mittal and Pradip Gokhale are the new joint fund managers for this fund.
If you had started a monthly SIP of र 5,000 in TATA Balanced Fund - Growth option, in August 2006, you would have accumulated a corpus of र 13.74 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 16%. %. Check SIP returns of this fund.
The fund has got excellent rating from valueresearch i.e. 4 Star. CRISIL has also accorded a very good rating – Rank 2, in its recent mutual fund ranking for the quarter ending Mar 31, 2016.
The top 5 stocks that the fund is invested in are, Infosys, HDFC Bank, Reliance Industries, Yes Bank, Power Grid Corporation and HCL Technologies. The 3 top sectors are Financial, Construction and Healthcare.
You may like to read the fund review – A top pick for the balanced fund investors
Reliance Regular Savings Fund - Balanced Option
Reliance Regular Savings Fund – Balanced Option, launched in June 2005, this is a popular fund from Reliance Mutual Fund stable having AUM of र 2,691 Crores (As on June 30, 2016). It is one of the best performing Balanced Funds in our study with a track record of around 11 years. Amit Tripathi and Sanjay parekh are the joint fund managers for this fund.
If you had started a monthly SIP of र 5,000 in Reliance Regular Savings Fund – Balanced Option Growth plan, in August 2006, you would have accumulated a corpus of र 13.27 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 15.38%. Check SIP returns of this fund.
The top 5 stocks that the fund is invested in are, Infosys, HDFC Bank, Reliance Industries, Maruti Suzuki and TATA Motor DVR. The 3 top sectors are Financial, Automobile and Energy.
You may like to read 10 years of strong performance by Reliance Regular Savings Fund Balanced Option
Birla Sun Life Balanced 95 Fund
Birla Sun Life Balanced 95 Fund, launched in 1995, it is another popular and old fund in Balanced fund category by Birla Sun Life Mutual Fund stable having AUM of र 3,140 Crores (As on June 30, 2016). It is one of the best performing Balanced Funds in our study with a track record of more than 20 years. Mahesh Patil, one of the finest Mutual Fund Managers in the MF industry, manages this fund along with Pranay Sinha.
If you had started a monthly SIP of र 5,000 in Birla Sun Life Balanced 95 Fund - Growth option in August 2006, you would have accumulated a corpus of र 13.19 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 15.26%. Check SIP returns of this fund
The top 5 stocks that the fund is invested in are - Infosys, HDFC Bank, Maruti Suzuki, TATA Motors and ICICI Bank. The 3 top sectors are Financial, Automobile and Energy
We reviewed this fund two years back but the same is still relevant. You may like to read the same 19 years of superb performance by Birla Sun Life 95 Fund
ICICI Prudential Balanced Fund
ICICI Prudential Balanced Fund, launched in November 1999, it is another popular fund in the Balanced Fund category from India’s No.1 AMC, ICICI Prudential Mutual Fund having AUM of र 3,018 Crores (As on June 30, 2016). It is also one of the best performing Balanced Funds in our study with a track record of around 17 years. Sankaran Naren, the veteran Fund Manager manages this fund along with Manish Banthia and Yogesh Bhatt.
If you had started a monthly SIP of र 5,000 in ICICI Prudential Balanced Fund - Growth option in August 2006, you would have accumulated a corpus of र 12.88 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 14.82%. Check SIP returns of this fund
The fund has got excellent rating from valueresearch i.e. 4 Star. CRISIL Rank for this fund is 3, according to their mutual fund ranking for the quarter ending Mar 31, 2016.
The top 5 stocks that the fund is invested in are – Power Grid, Coal India, Cipla, Reliance and Bharti Airtel Ltd. The 3 top sectors are Energy, Financial and Healthcare.
We reviewed this fund sometime back which you might like to read an ideal balanced fund for investors with moderate risk appetite
Franklin India Balanced Fund
Franklin India Balanced Fund launched in December 1999, it is another popular fund in the Balanced Fund category from Franklin Templeton Mutual Fund having AUM of र 1,160 Crores (As on June 30, 2016). It is also one of the best performing Balanced Funds in our study with a track record of around 17 years. Sankaran Naren, the veteran Fund Manager manages this fund along with Manish Banthia and Yogesh Bhatt.
If you had started a monthly SIP of र 5,000 in Franklin India Balanced Fund - Growth option in August 2006, you would have accumulated a corpus of र 12.43 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 14.82%. Check SIP returns of this fund
Valueresearch has given this fund a 3 Star rating whereas CRISIL Rank is 1 for this fund, according to its mutual fund ranking for the quarter ending Mar 31, 2016.
The top 5 stocks that the fund is invested in are – HDFC Bank, AXIS Bank, Indusind Bank, Infosys Yes Bank. The 3 top sectors are Financial, Automobile and Energy.
SBI Magnum Balanced Fund
SBI Magnum Balanced Fund launched in December 1995, it is another popular fund in the Balanced Fund category from SBI Mutual Fund having AUM of र 5,184 Crores (As on June 30, 2016). It is also one of the best performing Balanced Funds in our study with a track record of more than 20 years. Sri Dinesh Ahuja and R. Srinivasan are the joint Fund Manager for this fund.
If you had started a monthly SIP of र 5,000 in SBI Magnum Balanced Fund - Growth option in August 2006, you would have accumulated a corpus of र 12.37 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 14.05%. Check SIP returns of this fund
Valueresearch has given this fund a 3 Star rating whereas CRISIL Rank is 4 for this fund, according to its mutual fund ranking for the quarter ending Mar 31, 2016.
The top 5 stocks that the fund is invested in are – HDFC Bank, SBI, E-Clerx Services, Divi’s Lab and Infosys. The 3 top sectors are Financial, Services and Technology.
DSP BlackRock Balanced Fund
DSP BlackRock Balanced Fund launched in December 1995, it is another popular fund in the Balanced Fund category from DSP BlackRock Mutual Fund having AUM of र 1,226 Crores (As on June 30, 2016). It is also one of the best performing Balanced Funds in our study with a track record of more than 20 years. Sri Dinesh Ahuja and R. Srinivasan are the joint Fund Manager for this fund.
If you had started a monthly SIP of र 5,000 in DSP BlackRock Balanced Fund - Growth option in August 2006, you would have accumulated a corpus of र 11.79 Lakhs with an investment of only र 6.00 Lakhs in 10 years. Over the 10 year period the fund has given compounded annual returns of 13.15%. Check SIP returns of this fund
Valueresearch has given this fund a 3 Star rating whereas CRISIL Rank is 3 for this fund, according to its mutual fund ranking for the quarter ending Mar 31, 2016.
The top 5 stocks that the fund is invested in are – HDFC Bank, Yes Bank, Ultratech Cement, SBI and BPCL. The 3 top sectors are Financial, Chemicals and Automobiles.
Conclusion
In this article, we have seen how SIPs of Top Balanced Funds have created wealth for the investors over long term period. We also analyzed that top performing Balanced Funds gave as good returns as top performing Large Cap funds. But Balanced Funds are less risky then Large Cap Funds and thus suitable for moderate risk takers.
However, before you embark on the journey of wealth creation, it is important to select schemes from categories which is best suited to your risk profile (Check your Risk profile here). In our blog posts, we have always suggested to our readers to take help of a financial advisor in terms of understanding your risk profile and also the risk return rewards of different category of mutual fund schemes.
Wishing you a great wealth creation journey!
(Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.) -Courtecy: Advisors Khoj
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