Main benefit investing in Balanced Fund:-
1) More Stable Return
The overall portfolio risk of balanced fund is reduced because the returns of the equity and bond investments are generally not positively correlated. The potentionally higher but more volatile returns from equity investments are moderated by the fund's investment in bonds. As a reult, the returns of a balanced fund should be less volatile than a conventional equity fund.
2. Rebalancing
Another benefit of balanced fund is that in times of rising markets these funds 'automatically' rebalance the portfolio by taking profits on equity investments which have appreciated and rebalancing the portfolio to its original equity; bond asset allocation of 60:40. Thanks to this rebalancing process, the unit trust investor need not worry about when to take profits on their investments.
3. Capital Growth
A balanced fund will allow the investor to participate in the long term capital growth of equity markets because a sizable portion up to 60% of the fundis invested in equities.
In conclusion, balanced funds are suitable for medium to long term investors with conservative to moderate risk reward temperament with a preference for receiving income and a respectable measure of capital growth. Investing in a balanced fund helps unit trust investors stay focused on achieving their long term investment goals wiyhout requiring them to evaluate the prevailing market structure.
