Mutual funds are known to be the most common types of investments that every investor usually starts his investments with. There are different types of funds that a person can own and the main thing which differentiates them from one another is the type of investments that they own.
There are some mutual funds which are known only to own stocks and these are referred to as equity funds. There are others which own only bonds. There are, yet others which own both types and are known as blended, or balanced funds.
These may also be referred to as balanced equity funds or hybrid funds and are typically invested in equities and debt instruments. They are thus, equity-oriented as well as debt-oriented hybrid plans. Thus, balanced equity funds are known for their unique ability to achieve a certain level of diversification.
The asset allocation is usually taken care of by the fund manager. These funds are also beneficial because of the risk-adjusted returns which it offers. In fact, there have been many instances when they have been known to outperform equity funds.
This could also be, because the fund manager employs an aggressive method on the equity portion and also has a significant small and mid-cap exposure. It could also, be a result of stock picking or portfolio management capabilities of the fund manager.
Investing in these types of funds is known to be extremely beneficial for investors. It can help to achieve strong long-term track record for its returns. It also is a result of dynamic asset allocation between equity and debt funds. As a result, it combines high-return potentials of equity asset class with the low-risk benefits of fixed-income asset class.
Investing in these funds is primarily suitable for those investors who seek long-term investment horizon and capital growth and income. They are known to involve a high amount of risks with them. Some of the top sectors where these funds are invested in are banks, software, pharmaceuticals, finance, textile products, petroleum products, pesticides, consumer non durables and construction projects.
There are plenty of mutual fund companies offering various balanced mutual funds to invest in. It is easy to browse through the various fund companies online. Investors can even make their investments for the same online. However, before making any investment it is always advisable to first consult a financial advisor before making any investment.