Is it a good idea to invest in equity oriented balanced mutual funds as a first time investor?


Is it a good idea to invest in equity oriented balanced mutual funds as a first time investor?


There is no hard and fast rule as to which is the best investment instrument for new investor. It all depends on your financial outlook, finances, expectations and risk bearing capacity.

Yes balanced mutual funds are a good option for many investors because balanced mutual funds are intrinsically hybrid funds that invest in both equity markets as well as in debt instruments. The advantage of balanced funds is that fact that they avoid concentration in one specific sector making them more prone to offer decent results even if one sector undergoes a bear cycle or a negative market sentiment. Equity-oriented balanced funds also offer the advantage of tax benefits in the long term as capital gains.


How much importance should I give to the past performance of any mutual fund?


Past performance should not be a yardstick to select any mutual fund but that does not mean one should ignore the past performance. It is always a good idea to take an active look at the history of the fund, its performance, dividend ratio and sectors the fund has invested in. Although past performance does not guarantee future performance, it can give an idea about the overall performance of the fund in previous years in comparison to other funds in its asset class. Make sure to check the investment history and success rate of the mutual fund manager before deciding on a investing on any new mutual fund.


Hi Dhyan,

Mutual Funds invest in stocks on your behalf. Investing in a Mutual Fund is the best way to start your journey into the stock market. Equity diversified funds are the ones you should start with. These funds invest across different companies so your risks are lowered. The portofolio concentration or the risks of investing too much in a particular stock or sector, is less in case of Equity diversified funds. You can even opt for an Equity Linked Savings Scheme (ELSS). This will help you save tax. Want to invest in Mutual Funds? Click here.

BB Expert