Should I divide my money into Equity and Debt funds or Balanced funds?
If you are looking for stable growth I would prefer balanced funds instead of dividing my money into separate Equity and debt funds.
There are two reasons:
First is tax treatment: Debt funds will have higher tax even as long term gain tax which is for 3 years. You have a choice of paying 20% flat tax or 10% with indexation. Even though debt funds are better placed compared to FDs as for as tax treatment is concerned, there is still better option of making this tax zero (in your case) by investing in balanced fund. In balanced funds though debt portion can be up to 35%, tax is 10% after 1 year.
Second advantage is simplified portfolio management. You manage 1 balanced fund instead of 1 equity and 1 debt fund.
Previous Article