When an investor invests both in debt market and stock market by taking both bonds and shares, at that time total fund in his hand will be balanced fund. We say it balanced fund because it creates the balance between risk and income.
Know, how will balanced fund balance the risk and income. There is great relationship between risk and income in every type of investment. When investor invests in secured debt, he will get only fixed interest but it will low because he did not take high risk. When investor invests in the stock fund, it may be risky but it will give high return through dividend but it will not fix. So, investment in stock fund brings two type of risk.
(a) Risk of sinking the money in stock fund. When value of share will decrease in the stock market, at that time, value of invested shares will also decrease. So, invested money may be zero within one day.
(b) Risk of not getting return on stock fund. If stock is not performing well and company in which investor has invested the money, will get loss, at that time, investor will not get dividend.
So, a rational investor will invest his total investment into two or three parts. One part, he will invest in bonds. Second part of his investment, he will invest in mutual funds. Third part of his investment, he will invest in stock fund.
Main Features of Balanced Funds
1. # To diversify total investment into bonds and stock.
2. # If investor wants to get high return, major part of investment will be in equity.
3. # Investor can use automatic re-balance his portfolio after seeing both debt and stock market conditions. It is your personal portfolio software which will show automatic re-balance portfolio where you will get high return and low risk. It is on you whether you will accept or not. Through this, investor can get the protection in case of volatile market.
Know, how will balanced fund balance the risk and income. There is great relationship between risk and income in every type of investment. When investor invests in secured debt, he will get only fixed interest but it will low because he did not take high risk. When investor invests in the stock fund, it may be risky but it will give high return through dividend but it will not fix. So, investment in stock fund brings two type of risk.
(a) Risk of sinking the money in stock fund. When value of share will decrease in the stock market, at that time, value of invested shares will also decrease. So, invested money may be zero within one day.
(b) Risk of not getting return on stock fund. If stock is not performing well and company in which investor has invested the money, will get loss, at that time, investor will not get dividend.
So, a rational investor will invest his total investment into two or three parts. One part, he will invest in bonds. Second part of his investment, he will invest in mutual funds. Third part of his investment, he will invest in stock fund.
Main Features of Balanced Funds
1. # To diversify total investment into bonds and stock.
2. # If investor wants to get high return, major part of investment will be in equity.
3. # Investor can use automatic re-balance his portfolio after seeing both debt and stock market conditions. It is your personal portfolio software which will show automatic re-balance portfolio where you will get high return and low risk. It is on you whether you will accept or not. Through this, investor can get the protection in case of volatile market.
Comments