Balanced Fund or a DEBT Fund for a Goal in 5 Years

POSTED BY sunil ON May 19, 2013 3:29 pm COMMENTS (15)

Dear All,

For any goal which is due in 5 years which become the best way to invest, a Balanced Fund or a Debt Fund.

The Balanced Fund has Nil Tax (But carries some risk)…. and Debt Fund has Tax with Indexation…

Which way the best way?

15 replies on this article “Balanced Fund or a DEBT Fund for a Goal in 5 Years”

  1. sunil says:

    Rightly said…

    As i said “I do understand not to time markets, but still cannot resist asking this.”. Cannot stop my human mind to stop thinking that way.

    Fine Ashal, i shall work on the calculation with the way you suggested (50K lump sum into Balanced) and then completing investing with in 1 year.

    I shall update in a day or two on the strategy i am following.

    By the way, currently HDFC Balanced seems a good balanced fund with Good Management and Good Past performance (No guarantee though). Do you have anything else in mind????

    Also it has less overlapping with my current portfolio Fund (Quantum Tax Saver).

  2. Dear Sunil, in that case you should not tempted to invest in Eq. at all & should opt pure debt funds. 🙂



  3. sunil says:

    Dear Ashal,

    That sounds very logical, but at this point of time (At market highs) would it make sense to go in with Lump sum. I do understand not to time markets, but still cannot resist asking this.

  4. Dear Sunil, the lump sum investment should get more time in Eq. to earn better return. Also the potential is there in balanced fund to get you there very early. That’s why, I’m asking to invest all in balanced fund.



  5. sunil says:

    Thanks Ashal for the feedback.

    Yeah, what you said is true, i have to switch all my investments into Debt atleast by end of 4Th year.

    My take is going with 50K Lumpsum in a Debt Fund and do a SIP in a Balanced Fund.

    How would this be???.

    Since for the Debt Fund, i can have maximum tax benefit from Indexation ..

    Will this method be doing any harm other than investing 50k into Balanced at one go and then 3K every month.

    I will take the increase in SIP suggestion, it seems valid.

  6. Dear Sunil, although your return expectation is very moderate but as you are going to invest 50K lump sum as of now & 3K mly here onwards, my take ‘ll be to go for a balanced fund. Try to complete the 3K mly amount in 1Y or possibly 1.5 year by increasing the SIP amount. Later on please switch to debt fund if you are able to get your target in next 2-3-3.5 years. Even if Target point is not achieved, please switch to debt fund before completion of 4Y of holding from here onwards.



  7. Dear Sunil, is it going to be mly investment or one lump sum? What is the exact target amount you are looking for? Please do not look for taxation in isolation to decide your vehicle.

    I w’d like to know more about your requirements & then only I can suggest anything.



    1. sunil says:

      @FFC, thanks for the link…

      @ Ashal, I am looking at around 150000 of corpus in a span of 5 years with a moderate return of 8% (CAGR).

      I shall be investing in Lumpsum of around 50,000 (At once) and remaining in SIP mode…. over a period of 2 years. 3000 per month.

      Total Investment 122000.

      Can you please let me know which way would be better… A Complete Debt Fund or a mix of Balanced and Debt… If so what should be the extent…. i feel 40-60 (Equity – Debt).

      Thanks in advance

  8. 3sharad says:


    I would suggest ICICI Pru Equity Volatility Advantage plan. Its better than HDFC balanced fund as per our analysis.


  9. sunil says:

    Thanks sumit for the suggestion.
    Yeah, i will surely going to follow the SIP into HDFC Balanced… but not into any aggressive Fund(Sorry for Reliance Equity…) ‘Coz i can’t be aggressive for my Goal.

    Thanks again…

    If anyone has any other views…???

  10. Sumit says:

    Balanced fund is a good option as you said – to get exposure on debt component without paying taxes on that. HDFC balance played very well and outperformed some of best known large cap funds when equity market was not doing well in past.

    Hence I think, 1 SIP in balance fund, and 1 SIP in bit a aggressive fund like Reliance Equity Opp(or other in same catg) and lumpsum (if possible) on SBI dynamic/Magnum Income will do well.

    1. Mehul Sharma says:

      @sumitji – r u sure lumpsum (around 1 lac for more than 6 y)
      on SBI dynamic/Magnum Income or Quantum LTEF/
      Franklin India Blue Chip and
      IDFC Dynamic BOnd Fund/SBI
      Dynamic Bond Fund. which option wud b best to get max benefits.

  11. sunil says:

    Yeh sumit, tht’s right….

    But would it be best to go with a blend of Balanced and Debt Fund portfolio..

    in this case : HDFC Balanced and IDFC Dynamic BOnd Fund/SBI Dynamic Bond Fund


    A Equity (Diversified) and Debt Fund portfolio.

    in this case : Quantum LTEF/Franklin India Blue Chip and IDFC Dynamic BOnd Fund/SBI Dynamic Bond Fund

    1. Sunil,

      Before you invest in equity for goal of such duration suggest you look at how SIPs for such durations have fared historically:

      Suggest you keep equity exposure as small as possible.

  12. Sumit says:

    NO one should guarantee the best way – it depends upon your risk appetite.

    I would put around 75% in equity and 25% in debt for a 5 year goal, if I were you. Indian Equities should do well in coming times.

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