Hybrid Fund

In a hybrid fund, the investment is done in multiple asset classes to cater to the need for fluctuating levels of risk tolerance. Typically, the investments are made in a mix of equity and fixed income instruments.

Following are the benefits of hybrid funds

  • Balance risk and return
  • Diversification of your portfolio 
  • Suited for first-time investors
  • Systematic investment plan (SIP)
  • Lower volatility
  • Higher returns
  • Lower expenses 

What are Hybrid Mutual Funds?
Hybrid funds provide investors with a flavour of both equity and debt instruments in a single fund. These are designed to meet the investment objective of the scheme. Each hybrid fund has a different combination of equity and debt targeted at different types of investors. Aggressive Hybrid funds have higher exposure towards equity stocks whereas conservative Hybrid Funds have higher exposure towards Debt instruments.

How does a Hybrid Fund work?
A hybrid fund endeavours to create a balanced portfolio to offer regular income to its investors along with capital appreciation in the long-term. The fund manager creates a portfolio ( Aggressive or Conservative) according to the investment objective of the scheme and allocates the funds in equity and debt instruments accordingly. If required, the fund manager also buys or sells assets to maintain the balance and generate favourable returns for the investors. 

Who should invest in a Hybrid Mutual Fund?
The risk associated with Hybrid funds falls between debt funds and equity funds. They tend to offer better returns than debt funds and are preferred by investors who don’t want to take a higher risk than equity funds. Further, new investors who are not versed with the equity market tend to start with hybrid funds. This is because the debt component offers stability while they test the equity ‘waters’. Hybrid funds allow investors to enjoy returns out of equity investments in the portfolio while cushioning themselves against extreme volatility in the market through debt exposure in the fund.