You want growth. But you also want to sleep peacefully at night.
If that sounds like you, balanced mutual funds deserve a closer look. These funds blend equity and debt in a single portfolio. When markets fall, the debt cushions the blow. When markets rise, the equity captures gains.
At Belong, we've helped many NRIs in the UAE build portfolios that balance both safety and growth. The question we hear most often: "Which balanced fund actually delivers stable returns without wild swings?"
This guide covers everything you need to know. From fund categories and top performers to taxation rules and smarter alternatives in GIFT City. By the end, you'll know exactly which fund suits your goals.
What Makes a Mutual Fund "Balanced"?
A balanced mutual fund invests in both equity (stocks) and debt (bonds). The mix varies by fund type. Some lean heavily toward stocks. Others prefer bonds. The goal remains the same: reduce risk while generating reasonable returns.
SEBI classifies hybrid funds into several categories. Each serves a different risk appetite. Here's a quick breakdown:
Fund Category | Equity Allocation | Debt Allocation | Risk Level | Typical 5Y Returns |
|---|---|---|---|---|
Aggressive Hybrid | 65-80% | 20-35% | Moderately High | 15-22% |
Balanced Advantage | 30-80% (dynamic) | 20-70% (dynamic) | Moderate | 12-20% |
Multi-Asset Allocation | 10-80% | 10-80% | Moderate | 15-21% |
Conservative Hybrid | 10-25% | 75-90% | Low to Moderate | 7-12% |
Equity Savings | 65%+ (incl. arbitrage) | 10%+ | Moderately Low | 10-14% |
The "balanced" label applies broadly. Your choice depends on how much stability you actually need versus how much growth you want.
👉 Tip: If you're within 5 years of retirement, consider conservative hybrid or equity savings funds. They protect capital better during market crashes.
Why NRIs Should Consider Balanced Funds
Living in the UAE means you can't monitor Indian markets daily. Time zone differences make active management difficult. Balanced funds solve this problem elegantly.
Here's why they work well for NRIs:
Automatic rebalancing. Fund managers shift between equity and debt based on market conditions. You don't need to time the market yourself. When markets look expensive, they reduce equity. When valuations drop, they buy more stocks.
Lower volatility. Pure equity funds can drop 30-40% during corrections. Balanced funds typically fall 15-20% in similar conditions. The debt portion acts as a shock absorber.
Tax efficiency. Funds maintaining 65%+ equity allocation get equity taxation benefits. Long-term capital gains (held over 12 months) are taxed at just 12.5% above ₹1.25 lakh exemption.
Simpler portfolio. Instead of managing separate equity and debt funds, one balanced fund handles diversification automatically. This is especially valuable when you're managing investments from abroad.
Best Balanced Advantage Funds for 2025
Balanced Advantage Funds (BAFs) are the most popular choice for stable returns. They dynamically adjust equity exposure based on market valuations. When markets are high, they reduce stocks. When markets dip, they increase equity allocation.
According to AMFI data, hybrid fund assets crossed ₹10.03 lakh crore in 2025, with significant inflows into balanced advantage schemes.
Here are the top performers ranked by 5-year returns:
Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio | Equity Allocation |
|---|---|---|---|---|---|
HDFC Balanced Advantage Fund | 20.34% | 18.13% | 1,01,773 | 0.75% | 64% |
Baroda BNP Paribas BAF | 16.11% | 14.75% | 4,424 | 0.77% | ~55% |
ICICI Prudential BAF | 13.92% | 14.13% | 69,868 | 0.90% | 49% |
Edelweiss Balanced Advantage | 13.40% | 13.10% | ~3,400 | 0.60% | ~58% |
Nippon India BAF | 13.30% | 13.10% | 9,749 | 0.60% | 62% |
Data as of December 2025. Source: Groww, Value Research
HDFC Balanced Advantage Fund
This is India's largest balanced advantage fund with over ₹1 lakh crore in assets. It uses a proprietary model to shift between equity and debt.
The fund delivered 20.34% annualized returns over 5 years. During the 2020 crash, it fell less than pure equity funds. It recovered faster too.
Best for: Investors wanting a proven track record with dynamic allocation. The high AUM shows investor confidence but may limit agility in smaller market segments.
ICICI Prudential Balanced Advantage Fund
Launched in 2006, this is India's oldest BAF. It pioneered dynamic asset allocation strategies in the Indian market.
The fund maintains relatively lower equity exposure (around 49%). This makes it more conservative than HDFC BAF. Returns are moderate but consistent across market cycles.
Best for: Conservative investors who prefer stability over aggressive growth. The fund's 18+ year track record speaks to its reliability.
👉 Tip: Check the fund's current equity allocation before investing. A BAF with 70% equity behaves very differently from one with 40% equity.
Best Aggressive Hybrid Funds for Higher Returns
Want more growth with some stability? Aggressive hybrid funds maintain 65-80% in equity and 20-35% in debt. They're riskier than BAFs but offer better upside.
According to Business Standard, the aggressive hybrid category's asset base grew 13% year-on-year to ₹2.5 lakh crore by October 2025. The number of investor folios increased to 60.44 lakh.
Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|
ICICI Prudential Equity & Debt | 22.77% | 19.60% | 49,223 | 0.90% |
Bank of India Mid & Small Cap E\&D | 21.12% | 18.18% | 1,321 | 0.80% |
Mahindra Manulife Aggressive Hybrid | 19.57% | 18.03% | ~1,500 | 0.60% |
JM Aggressive Hybrid | 19.03% | 19.24% | ~800 | 0.55% |
Edelweiss Aggressive Hybrid | 19.00% | 17.92% | 3,413 | 0.40% |
Data as of December 2025. Source: Groww, Scripbox
ICICI Prudential Equity & Debt Fund
This fund leads the aggressive hybrid category with a 5-year CAGR of 22.77%. It maintains around 73% in equities with the rest in debt instruments.
The fund has outperformed its benchmark (Nifty 50 Hybrid Composite Debt 65:35 Index) consistently. It's suitable for investors with a 5-7 year horizon who can tolerate moderate volatility.
Edelweiss Aggressive Hybrid Fund
With the lowest expense ratio (0.40%) among top performers, this fund offers good value. It delivered 19% over 5 years while keeping costs minimal.
Best for: Cost-conscious investors who understand that even 0.5% lower expenses compound significantly over time.
Best Conservative Hybrid Funds for Capital Protection
If you prioritize safety over growth, conservative hybrid funds are your answer. They invest 75-90% in debt and only 10-25% in equity.
These funds typically deliver 7-12% annually. That's better than fixed deposits but with slightly higher risk.
Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|
Bank of India Conservative Hybrid | 11.82% | ~10% | ~200 | ~1.0% |
SBI Conservative Hybrid | 8.50% | 7.50% | 10,063 | 1.54% |
HDFC Hybrid Debt | ~9% | ~8% | ~4,000 | 0.90% |
Aditya Birla Regular Savings | ~8.5% | ~7.5% | ~1,000 | 1.10% |
Data as of December 2025. Source: Value Research
When to Choose Conservative Hybrid Funds
Consider these funds if you:
- Are within 3 years of a major goal (home purchase, child's education)
- Cannot tolerate portfolio drops exceeding 10-15%
- Want better returns than FDs without significant equity risk
- Need regular income through SWP (Systematic Withdrawal Plans)
The catch: These funds are taxed as debt funds since equity allocation stays below 65%. Capital gains are added to your income and taxed at slab rates. For NRIs, TDS applies at 30% for short-term gains.
👉 Tip: If you want conservative allocation with equity taxation benefits, look at equity savings funds instead.
Best Multi-Asset Allocation Funds
Multi-asset funds spread investments across equity, debt, and gold (or other commodities). SEBI mandates at least 10% allocation to each of three asset classes.
This three-legged approach provides stability that two-asset funds can't match. When stocks fall, gold often rises. When both struggle, debt holds steady.
Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|
Quant Multi Asset Fund | 27.47% | 19.47% | 3,201 | 0.61% |
ICICI Prudential Multi-Asset | 21.07% | 18.66% | 51,027 | 0.72% |
HDFC Multi-Asset | ~17% | ~15% | ~3,500 | 0.80% |
SBI Multi Asset Allocation | ~16% | ~14% | 11,306 | 0.75% |
Axis Multi Asset Allocation | ~14% | ~12% | ~2,500 | 0.80% |
Data as of December 2025. Source: Angel One, Groww
ICICI Prudential Multi-Asset Fund
This is the largest multi-asset fund with over ₹51,000 crore in AUM. It maintains roughly 66% equity, 24% debt, and 10% gold.
The fund's Sharpe ratio of 1.44 indicates strong risk-adjusted returns. It has navigated multiple market cycles successfully over its 20+ year history.
Best for: Investors wanting built-in diversification without managing separate equity, debt, and gold investments.
How Multi-Asset Funds Handle Currency Risk
Here's something most NRIs don't consider: currency risk.
Say you invest $10,000 (₹8.65 lakh at ₹86.5/USD) in January 2025. One year later, your fund grows 12% to ₹9.69 lakh. But if the rupee depreciates to ₹88.5/USD, you get only $10,941 when repatriating. Your dollar return is just 9.4%, not 12%.
Multi-asset funds with gold allocation provide some currency hedge. Gold typically rises when the rupee weakens. Use Belong's Rupee vs Dollar Tracker to monitor trends before major redemptions.
Best Equity Savings Funds for Tax Efficiency
Equity savings funds combine equity, debt, and arbitrage in one portfolio. They maintain 65%+ equity (including hedged positions) to qualify for equity taxation. But the actual unhedged equity exposure stays low (20-40%).
This structure delivers:
- Equity tax treatment (12.5% LTCG above ₹1.25L)
- Lower volatility than pure equity funds
- Better returns than conservative hybrid funds
Fund Name | 5Y CAGR | 3Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|---|
Edelweiss Equity Savings | 11.20% | 12.32% | ~1,500 | 0.50% |
HDFC Equity Savings | ~10.5% | ~11% | ~2,500 | 0.70% |
SBI Equity Savings | ~10% | ~12% | ~3,000 | 0.80% |
Kotak Equity Savings | ~10% | ~11% | ~2,000 | 0.60% |
Data as of December 2025. Source: Groww
How Arbitrage Works in These Funds
The arbitrage portion buys stocks in the cash market and simultaneously sells futures. This locks in a small, virtually risk-free profit. The returns are modest (6-8% annually) but consistent.
Combined with debt and a small unhedged equity portion, these funds deliver 10-14% returns with significantly lower volatility than pure equity funds.
Best for: Conservative investors who want equity tax benefits without taking full equity risk.
Taxation Rules for NRIs on Hybrid Funds
Tax treatment depends on the fund's equity allocation. This changed significantly after July 23, 2024.
Equity-Oriented Funds (65%+ equity allocation)
Holding Period | Tax Rate | Notes |
|---|---|---|
Less than 12 months (STCG) | 20% | Changed from 15% |
More than 12 months (LTCG) | 12.5% on gains above ₹1.25L | Changed from 10% above ₹1L |
Most balanced advantage, aggressive hybrid, and equity savings funds fall in this category.
Debt-Oriented Funds (below 65% equity)
Holding Period | Tax Rate | Notes |
|---|---|---|
Any period | Added to income, taxed at slab rate | No LTCG benefit |
Conservative hybrid funds typically fall here since equity allocation stays 10-25%.
TDS for NRIs
Banks and AMCs deduct TDS on all redemptions. For equity-oriented funds:
- STCG: 20% TDS
- LTCG: 12.5% TDS on gains above ₹1.25L
You can claim refunds by filing ITR if TDS exceeds actual liability.
👉 Tip: Split large redemptions across two financial years. Use the ₹1.25 lakh LTCG exemption twice instead of once.
For detailed guidance, check our NRI taxation guide.
A Smarter Alternative: GIFT City Funds
Here's what most NRIs miss: GIFT City funds offer completely tax-free returns for UAE residents.
Under Section 10(4D) of the Income Tax Act, capital gains from GIFT City funds are fully exempt from Indian tax. Combined with UAE's zero-tax regime, you pay 0% tax on your investment gains.
How This Works
Parameter | Regular Indian MF | GIFT City Fund |
|---|---|---|
STCG Tax | 20% | 0% (for UAE NRIs) |
LTCG Tax | 12.5% above ₹1.25L | 0% (for UAE NRIs) |
Currency | INR | USD |
Repatriation | Through NRE/NRO | Fully repatriable |
Tax Savings Example
Invest ₹50 lakh in a balanced fund earning 15% annually for 10 years:
- Regular MF: Final corpus ₹2.02 crore, Tax on gains ~₹19L = Net ₹1.83 crore
- GIFT City: Final corpus ₹2.02 crore, Tax = ₹0 = Net ₹2.02 crore
That's ₹19 lakh saved just by choosing the right structure.
Explore funds like Tata India Dynamic Equity Fund available through GIFT City. Minimum investment starts at $500.
Compare options using Belong's GIFT City Mutual Funds Explorer.
How to Choose the Right Balanced Fund
Selecting a fund isn't just about past returns. Consider these factors:
1. Your Investment Horizon
Time Horizon | Recommended Fund Type |
|---|---|
1-3 years | Equity Savings, Conservative Hybrid |
3-5 years | Balanced Advantage |
5-7 years | Aggressive Hybrid, Multi-Asset |
7+ years | Aggressive Hybrid with higher equity |
2. Your Risk Tolerance
Ask yourself: How would you react if your portfolio dropped 20% in a month?
- Panic and sell: Conservative hybrid or equity savings
- Worried but hold: Balanced advantage
- See it as opportunity: Aggressive hybrid
3. Expense Ratio
Even 0.5% difference compounds significantly over time. On ₹50 lakh invested for 10 years:
- 0.5% expense ratio: ₹2.50L paid in fees
- 1.0% expense ratio: ₹5.00L paid in fees
Always compare direct plan costs. Avoid regular plans with higher expenses.
4. Fund Manager Track Record
Check how the fund performed during:
- March 2020 COVID crash
- 2022 correction
- Recent market volatility
Funds that fell less and recovered faster indicate better risk management.
5. Repatriation Needs
If you invested through NRE account, funds are fully repatriable. NRO investments have a $1 million annual limit.
Consider GIFT City options for unlimited USD repatriation without currency conversion hassles.
Model Portfolios for Different Goals
Here's how you might allocate across balanced funds based on your situation:
Conservative Portfolio (Retiring in 3-5 years)
Fund Type | Allocation | Purpose |
|---|---|---|
Conservative Hybrid | 40% | Capital protection |
Equity Savings | 30% | Tax-efficient stability |
Balanced Advantage | 30% | Moderate growth |
Expected returns: 10-12% annually with 10-15% max drawdown
Balanced Portfolio (7-10 year horizon)
Fund Type | Allocation | Purpose |
|---|---|---|
Balanced Advantage | 40% | Dynamic allocation |
Aggressive Hybrid | 35% | Growth engine |
Multi-Asset | 25% | Diversification |
Expected returns: 14-16% annually with 20-25% max drawdown
Growth-Oriented Portfolio (Young NRI, 15+ year horizon)
Fund Type | Allocation | Purpose |
|---|---|---|
Aggressive Hybrid | 50% | Long-term wealth creation |
Multi-Asset | 30% | Downside protection |
Balanced Advantage | 20% | Tactical allocation |
Expected returns: 16-18% annually with 25-30% max drawdown
👉 Tip: Review and rebalance annually. Market movements will shift your allocation over time.
Common Mistakes to Avoid
1. Chasing Last Year's Topper
A fund that delivered 25% last year might underperform next year. Look at 5-year rolling returns for consistency.
2. Ignoring Equity Allocation Changes
BAFs can shift from 70% equity to 40% equity based on their model. Check current allocation, not just historical allocation.
3. Investing Lump Sum at Market Highs
Even in balanced funds, SIP remains safer than lump sum during uncertain markets. It averages your purchase cost.
4. Not Considering GIFT City
UAE NRIs leaving money in regular Indian mutual funds pay 12.5-20% tax unnecessarily. GIFT City alternatives can save lakhs over time.
5. Selecting Regular Plans Over Direct
Regular plans pay commissions to distributors. Direct plans pass those savings to you. Difference can be 0.5-1% annually.
How to Start Investing as an NRI
Step 1: Complete KYC
Gather:
- PAN card
- Passport with valid visa
- Overseas address proof
- Passport-size photograph
Most AMCs offer video KYC for remote completion.
Step 2: Link Your Bank Account
You'll need an NRE or NRO account with an Indian bank. NRE accounts allow full repatriation of both principal and gains.
Step 3: Choose Your Platform
Options include:
- Direct with AMC websites
- Aggregator platforms (with NRI support)
- Belong app for GIFT City investments
Step 4: Start with SIP
Begin with a systematic investment plan. Even ₹5,000-10,000 monthly builds meaningful corpus over time.
Step 5: Set Up Auto-Debit
Link your NRE/NRO account for automatic monthly deductions. This ensures consistency despite busy schedules abroad.
FAQs
Which balanced fund is best for stable returns?
HDFC Balanced Advantage Fund leads with 20.34% 5-year returns while maintaining dynamic allocation. For more conservative investors, ICICI Prudential BAF offers stability with 13.92% returns. Your choice depends on risk tolerance and investment horizon.
Are balanced funds safe for NRIs?
Balanced funds are safer than pure equity funds due to debt allocation. However, they still carry market risk. Conservative hybrid funds (75-90% debt) are safest within this category. For capital guarantee, consider GIFT City fixed deposits instead.
How are balanced funds taxed for NRIs in 2025?
Funds with 65%+ equity allocation attract equity taxation: 20% STCG (under 12 months), 12.5% LTCG on gains above ₹1.25 lakh (over 12 months). Conservative hybrid funds with under 65% equity are taxed as debt funds at slab rates.
Can I invest in balanced funds from the UAE?
Yes. NRIs can invest through NRE/NRO accounts with any AMC that accepts NRI investments. Complete KYC remotely via video verification. Some US/Canada NRIs face restrictions due to FATCA compliance.
What is the minimum investment for balanced funds?
Most funds accept lump sum investments starting ₹500-5,000. SIP minimums range from ₹100-1,000 monthly depending on the fund house. Direct plans typically have same minimums as regular plans.
Should I choose SIP or lump sum for balanced funds?
SIP works better in volatile markets as it averages your purchase cost. Lump sum can work if markets are significantly corrected and you have a 5+ year horizon. Many investors combine both approaches.
Take Your Next Step
Balanced mutual funds offer a sensible middle path. You get equity growth potential without stomach-churning volatility. The key is choosing the right fund category for your specific situation.
For UAE NRIs, we strongly recommend exploring GIFT City options. The tax savings alone can add lakhs to your final corpus over a decade.
Use Belong's NRI FD Comparison Tool to compare fixed income alternatives. Check your residential status to understand tax implications. And explore GIFT City mutual funds for tax-free investing.
Have questions about which balanced fund suits your goals? Join our WhatsApp community where many NRIs discuss their investment strategies. Or download the Belong app to start investing in tax-efficient GIFT City products.
Disclaimer: Mutual fund investments are subject to market risks. Past performance does not guarantee future returns. Consult a SEBI-registered advisor before investing. Tax rules mentioned are as per current regulations and may change.
Published: December 2025 Author: Ankur Choudhary, CEO, Belong | SEBI-Registered Investment Advisor
