Balanced Mutual Funds Versus MIPs - Why Balanced Mutual Funds are Superior?

Balanced mutual Funds Versus MIP 

(It's not Apple to Apple, but when it

 comes to waiting period, you can't 

avoid comparing)

By Mr. B. Padmanaban, CFP^CM

Certified Financial Planner

www.fortuneplanners.com

When the debt mutual fund taxation moved from 

1 year to 3 years balanced fund is the 

best suitable product considering that 

3 years investment horizon is concerned.

Though past performance may not guarantee in the future, 

it will definitely give the better direction, if somebody 

really understands the data.

Hope the below data will help you to take a best decision forward.

October 8, 2013 and October 7, 2016		7th Oct 13	07-Oct-16
HDFC Balanced	26.23%	19895	28061
HDFC Prudence	25.39%	41.05%
HDFC MIP LT	15.49%	12.15%
October 8, 2012 and October 7, 2015		8th Oct 12	07-Oct-15
HDFC Balanced	20.68%	18708	26845
HDFC Prudence	18.07%	43.49%
HDFC MIP LT	11.55%	12.79%
October 8, 2011 and October 7, 2014		7th Oct 11	07-Oct-14
HDFC Balanced	20.94%	16232	26246
HDFC Prudence	20.66%	61.69%
HDFC MIP LT	11.87%	17.37%
October 8, 2010 and October 7, 2013		8th Oct 10	07-Oct-13
HDFC Balanced	2.88%	20250	19895
HDFC Prudence	-1.22%	-1.75%
HDFC MIP	4.20%	-0.59%
October 8, 2009 and October 7, 2012		8th Oct 09	07-Oct-12
HDFC Balanced	15.03%	16843	18708
HDFC Prudence	12.66%	11.07%
HDFC MIP LT	8.62%	3.56%
October 8, 2008 and October 7, 2011		8th Oct 08	07-Oct-11
HDFC Balanced	23.29%	11328	16232
HDFC Prudence	24.55%	43.29%
HDFC MIP LT	14.76%	12.74%
October 8, 2007 and October 7, 2010		8th Oct 07	07-Oct-10
HDFC Balanced	17.47%	17491	20250
HDFC Prudence	18.36%	15.77%
HDFC MIP LT	12.49%	5.00%
October 8, 2006 and October 7, 2009		8th Oct 06	08-Oct-09
HDFC Balanced	11.10%	12365	16843
HDFC Prudence	15.56%	36.22%
HDFC MIP LT	12.10%	10.85%

I have plotted the BSE - Sensex level versus balanced funds 

and MIP funds from HDFC.

The reason I have chosen HDFC is both MIP and balanced 

are consistent and longer years.

You can compare any other funds also. HDFC used

 only for illustrative purpose, not recommendation from my side!

Mr. B. Padmanaban, CFP^CMwww.fortuneplanners.com

Why Balanced Mutual Funds are Superior!!!

1. One thing it clearly shows for the last 6 years, balanced  fund have the ability to beat the broad index Sensex  comfortably in 3 year plus rolling return investments, at the same time it took lesser volatility than the Sensex.

2. Many retired people opt for Senior Citizen Savings Scheme (SCSS) and they are happy to lock their  investments for 5 years, considering the current 

market scenario balanced fund will give you much better return than the SCSS for sure.

3. The only 3 year period it has not delivered is between  October 8, 2010 and October 7, 2013 where the market is flat or -1.75% negative point to point returns.

4. Instead of appreciating all the 7 rolling returns, if someone is arguing that why it can't repeat in the next 3 years?

Yes, it is possible only if the market remains the same level what it is today after 3 years, which is according to impossible if you ask anybody in India, so this question is invalid!!!

5. Instead of pleasing the investor and saying that the client himself does not like volatile why one should look for balanced fund. Take responsibility to make the client understand, it is not really risky in the instrument considering the current scenario and the risk lies only in your mind.

6. The ratio between balanced funds AUM versus MIP is 3:1. This gap should be widened. On paper MIP seems to be less risky and less return compared to balanced fund. In reality, it is not so. If the client is decided to stay for longer years, no need to look up for MIP.

7. Good number of investors feel that MIP means we will get monthly regular income as the name suggests, but it is not so. The name itself is misleading!

8. When the Sensex moved from 19,895 to 28,000 it is only 41%, whereas the balanced fund has delivered 100% which means its literally doubled in the last 3 years.

9. Look at the alpha creation than the Sensex, it is huge. Falling interest rate, both debt and equity will do wonder in these type of funds in the next 3 years as well.

10. I strongly advise all my clients if they opt for 100 in safe investments, I advise them to consider 50% in the balanced funds and in the next 5 years it has the potential to double. Then move 50% to safer funds and again play with another 50% in the balanced fund and continue till your life time. No need to ignore this category just because somebody is old, as long as the investor can wait.

p.s. All the investments are subject to market risks, but we never feel it is risky or subject to market risk when we invest in GOLD or Real Estate. Just because it’s statutory message, many investors feels that it’s risky!

Today, many of us traveled by air, and there is an instruction about safety before it take off and in between also, if there is a turbulence, we hear the message saying that please do not get up from the seat, till the turbulence become normal. Many will not even pay attention to it, because we feel that it will be landed safely and no need to panic.

Similarly, MF investments also like that, longer the tenure your investment will be always safe. In air, rarely it will crash, in MF longer years say 7 to 10 years holding period will never crash!

B. Padmanaban, CFP^CM

Certified Financial Planner

www.fortuneplanners.com

9884349173

padmanaban@fortuneplanners.com

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