Does it make sense to buy a balanced fund over a pure play debt or equity product?
Balanced funds have an added advantage over a pure play debt or pure play equity product as portfolio rebalancing is done by the fund manager at no additional cost. A pure play debt and equity product will require the investor to constantly monitor the portfolio, so as to ensure that the debt equity mix is maintained. From a tax perspective too, a pure play debt product is taxed at a higher rate (short term gains are taxed based on the income tax slab of the investor and long term gains, are taxed at 10% without indexation or 20% with indexation whichever is lower) and hence the tax outflow will be higher while in a balanced fund, tax outflow will tend to be lower by virtue of the fact that balanced funds are taxed at rates applicable to an equity diversified scheme i.e. short term gains are taxed at 15% and long term gains are tax free Who should opt for a balanced fund? Investors with moderate risk appetite looking for growth of capital with downside protection during a market downtu
Related Questions
- How should an investor choose his/her investment portfolio from among so many types of products equity oriented, debt oriented, balanced fund, ULIPs, pension plan and child plans?
- What is the normal breakdown between the amount of debt and equity used to fund the investment?
- What types of financial instruments are used by the fund (debt, equity, combination)?
