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Balanced fund schemes are good investment options during volatile market conditions because of their well-defined asset allocation approach that protects investors from downside, says a Crisil report.
According to the rating agency, balanced funds have outperformed the Nifty across three, five, seven and 10-year time frames.
Balanced mutual funds follow a well-defined asset allocation approach that offers a higher degree of protection on the downside, but preserves much of the upside thereby serving investors well, the report says.
In a balanced fund, while 65-80% of the asset is allocated into equity, balance is invested into debt.
"Equity has the potential to deliver superior long-term returns while debt provides stability to the portfolio. This diversification protects the portfolio from downside risks if either equity or debt enters a bearish phase," says the report.
Stating that balanced funds are also less volatile than other schemes, it says they are also likely to be preferred by investors in times like today in a volatile debt market after the recent RBI tightening measures along with choppy equity market.
