Balanced Fund & ELSS

1. Best Mutual Fund Schemes
for
a Moderate Investor

2. 1. Concept of Mutual Funds
2. How Mutual Fund works
3. Types of Mutual Funds
4. Who is Moderate Investor?
5. Mutual Fund schemes based on Risks
6. Moderate Investor's profile assumption
7. Balanced Fund
8. Tax Saving Mutual Fund – ELSS
9. Conclusion
10. Bibliography

3. Many investors with common financial objectives pool their money.
Investors, on a proportionate basis, get mutual fund units for the sum
contributed to the pool.
The money collected from investors is invested into shares, debentures and
other securities by the fund manager.
The fund manager realizes gains or losses and collects dividend or interest
income.
Any capital gains or losses from such investments are passed on to the
investors in proportion of the number of units held by them.
Concept of Mutual Fund

4. Investors
Fund Manager
Securities based on
common financial
goal
Returns
Pool money and create
a fund, called MF
Returns passed to
Generates returns on
Investment Pool
Appoint a fund manag
er & invest money in
How Mutual Fund Works

5. Characteristics
• Investors who typically use a
mixture of stocks and
bonds
• Investors who seek income
stability and moderate growth
with moderate risk.
Asset Allocation:
• Fixed Income(Debt)
= 40%
&
• Equity = 60%
Time Horizon:
• Age : Often 35 – 55
• 20+Years : Mid-Term
Investment Horizon
Who is Moderate investor?
Mutual Fund schemes based on Risks:
Investment source are categorised under the fact of involved :Risks
High Risk Scheme Moderate Risk Scheme Low Risk Scheme
eg: All equity funds like-
 Sectoral Funds
 Index Funds
 Large-Cap Funds
 Small-Cap Funds etc.
eg: Hybrid products like-
 Monthly Income Plans(MIPs)
 Balanced Funds etc.
eg: Debt products like-
 Fixed Maturity Plans
 Short-Term Funds
 Gilt Funds
 Income Funds etc.

6. Mutual Funds
By structure By investment objective Other scheme
 Open-ended fund
 Close-ended fund
 Equity/Growth Oriented fund
 Income/Debt Oriented Fund
 Balanced Fund
 Money market/Liquid Fund
 Gilt Fund
 Index Fund
 Sector specific fund
 Tax Saving Scheme
 Fund of funds
 ETFs
Types of Mutual Funds

7. Let's take a case of Mr. Happy Singh
Net Monthly Saving = 50000 - (20000+2000+1000+7000) = Rs. 20000
Out of which he wants to invest in Mutual Funds for Rs. 9000 pre month and
rest Rs. 11000 (i.e., 20000 - 9000) will be kept as emergency fund per month.
Best scheme of MFs for Mr. Singh
Suggestion 1 : He should invest Rs. 6000 in Balanced Fund out of Rs. 9000 through SIP.
Suggestion 2 : Remaining Rs. 3000 in Tax Saving Mutual Fund (ELSS)
• Age - 40 yrs.(Married)
• Source of income - Salary (Senior executive in JP Morgan Co.)
• Time Horizon - 5 to 10 years
• Risk - Moderate Risk Taker
• Salary - Rs. 50000 Per month
• Expenses - Rs. 20000 per month
• Insurance Premium - Rs. 2000 on Term Insurance Policy of
20 Lakhs and Rs. 1000 on a Health Insurance of 3 Lakhs.
• PPF Contribution - Rs. 7000 Per Month

8. Balanced Funds
 Hybrid Products that take exposure to Equity & Debt
 Balance fund aims to strike a balance between growth and stability.
 Equity & Debt assets classes in the fund endeavour to :
Equity :
• To provide capital appreciation
• To generate returns above inflation
Debt :
• To provide stability in the portfolio
• To generate consistent income
Benifits :
 Capital appreciation through equity
 Income generation opportunities through debt
 Lesser volatility as compared to pure equity funds
 Potential of higher returns as compared to pure debt funds
 Better tax efficiency than pure debt funds

9. How do Balanced Funds work?
 Balance Funds provide diversification by investing in a diligent mix
 Aim to achieve returns greater than debt scheme, while taking risk than equity scheme.
40%
60%
DEBT
EQUITIES
• Consistent income
• Lower risk
• Long term growth
• Favorable Taxation
STATIC ASSET ALLOCATION PERIODIC REBALANCING
REASONABLE DOWNSIDE
PROTECTION :
Balanced Funds maintain a
largely static asset allocation
(60% equity & 40% debt)
Fund Manager generally books profits
when the equity markets rise and inve
sts more in equity as equity
markets fall.
The debt component acts as a
permanent cushion that provides the
portfolio with a reasonable
downside protection.

10. Investment in Balanced Funds through SIP
SIP returns on monthly Investment of Rs. 6000/-
Scheme Name Return % Present Value
Rs.
Return % Present Value
Rs.
Return % Present Value
Rs.
HDFC Balanced
Fund (G)
18.8 1,75,899 19.8 2,96,619 14.1 5,24,670
ICICI Prudential
Balanced AdvFund
(G)
12.5 1,64,337 15.0 2,74,077 13.0 5,08,820
Tata Balanced
Fund - RP(G)
20.2 1,78,600 19.6 2,95,635 14.7 5,33,571
SBI Magnum
Balanced Fund (G)
18.6 1,75,518 19.5 2,95,145 13.2 5,11,658
2 Years 3 Years 5 Years
Rs. 1,44,000/- Rs. 2,16,000 Rs. 3,60,000
*Returns over 1 year are Annualised.
*Returns are as on 28rd March, 2016.

11. Tax Saving Mutual Fund – ELSS
(Equity Linked Savings Scheme)
 A tax Saving instrument by mutual funds that invests in equity & equity related securities.
Benefits of investing in ELSS:
Deduction
U/S 80C
upto Rs.
1.5 Lac
Minimum investment :
• If Lump Sum - Rs. 5000
• If SIP - Rs. 500
Returns
are Tax
Free
Tax
Saving
Long Term
Investing
Approach
Higher
Returns
of stock
market
Wealth
Creation
 Lock - in period = 3 years.
 Expected Returns = Around 15% - 20%.

12. ELSS Investment Options:
ELSS
Growth Option Dividend Option
Dividend
payout
Dividend
Re-investment
The investors will not get any
income during the tenure of
investment. At the time of
redemption, the investorsget
lump-sum amount.
If the scheme declares a
Dividend, the investors
will receive Dividend
income.
The Dividend declared by
the scheme is re-invested
on behalf of the investors at
prevailing NAV on the day of
Dividend. Investors can
claim additional tax benefits
on re-invested dividend
amount.

13. Suggested ELSS Fund
Scheme Name Return % Present Value
Rs.
Return % Present Value
Rs.
Return % Present Value
Rs.
Birla Sun Life
Tax Relief 96 (G)
22.4 91,472 23.1 1,56,712 13.2 2,55,829
Axis Long Term
Equity Fund(G)
22.5 91,572 26.6 1,66,258 18.6 2,98,064
Reliance Tax Saver
(ELSS) Fund (G)
20.8 89,886 24.6 1,60,721 15.1 2,69,804
IDFC Tax Advantag
e (ELSS) Fund
- RP(G)
16.8 86,063 18.8 1,45,871 12.7 2,52,300
SIP returns on monthly Investment of Rs. 3000/-
2 Years 3 Years 5 Years
Rs. 72,000/- Rs. 1,08,000 Rs. 1,80,000
*Returns over 1 year are Annualised.
*Returns are as on 28rd March, 2016.

14. CONCLUSION
 Moderate Risk taker can consider take exposure to balance funds, which enable investment in key asset
classes - equity and debt - in a single structure. However, returns from these funds are market linked and
hence, investors are advised to consult their financial advisor and invest as per their risk - return profile.
 ELSS Funds can be considered as an ideal tool for tax saving and wealth creation. Nevertheless,
investors must make the proper choice of scheme. They may consult their financial advisor for details.
 Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Bibliography :
http://www.principalindia.com/cms/knowledge-centre/mutual-fund-basics.html
https://www.sbismart.com/learning_room/478?_e_pi_=7%2CPAGE_ID10%2C2753589754
http://m.moneycontrol.com/mutualfunds/top_ranked_funds.php?type=index
https://www.sbimf.com/SBI_Fund_Guru/index.aspx