Bull run, dividends fuel inflows in balanced funds

Balanced funds which invest in a mix of equity and bonds are attracting investors, leading to surging assets. Data from the Association of Mutual Funds (AMFI) shows that assets under management of this category have soared to Rs 1,02,000 crore from Rs 42,695 crore only a year back.

“Many balanced funds have been paying consistent monthlyquarterly dividends to investors, attracting many investors,“ said Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

With markets rising further, this trend of paying dividends is only increasing. Funds such as HDFC Prudence, ICICI Balanced, UTI Balanced, DSP BlackRock Balanced are some which have been paying monthly dividend, while HDFC Balanced, Birla Balance and SBI Balanced have been paying dividend quarterly . This has attracted money from investors looking to earn tax free dividend and wanting regular cash flows into these funds.

“There are a lot of first time investors coming to mutual funds from traditional savings products such as fixed deposits and small savings products. Such investors are asked to make a beginning using balanced funds,“ said Gajendra Kothari, MD and CEO, Etica Capital.

Given that the Sensex is trading at a PE of 24, a premium of 20 per cent to its 10year average PE of 20.08, wealth managers reckon that the balanced fund category where investors can stagger their investments, is a better way to enter the markets and will also shield investors in case there’s a correction.

Bank deposit rates are falling, performance from real estate and gold have been poor, and past returns from the balanced fund category is good, which has driven investors to such funds, point out distributors.

“A lot of investors want to increase their allocation to equities. Balanced funds, with a lower allocation to equity are a better bet for such investors,“ said Anup Bhaiya, MD, Money Honey Financial Services.

Balanced funds invest in a mix of equities and bonds, and allocate a minimum of…

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