What Are Hybrid Mutual Funds

Posted by AtishPatil on December 9th, 2019

Mutual funds are one of the most popular investment options available to investors in the market today. In spite of market fluctuations, mutual funds have delivered excellent results. Mutual funds pool together investments from people and then invest the funds raised in different assets. This generally helps to reduce the risk as compared to investing in the asset itself.

Market fluctuations may be too risky and put off beginner investors. Investing individually also requires a lot more research than investing in a mutual fund. For such investors, mutual fund investment is perfect.

What are hybrid funds?

Mutual funds investment depends on the risk of the fund. The risk of the fund depends on assets that the mutual fund invests in. If the mutual fund invests in equity then it is called an equity fund. If it invests in debt instruments, it is called a debt fund.

A hybrid fund invests its assets in both equity and debt instruments. This way it reduces the risk on the investment.

Types of hybrid funds:

Hybrid funds are categorized into two types:

Conservative Hybrid Fund:

A conservative hybrid fund invests a majority of its assets i.e 60% or more in debt and fixed income instruments. This provides a more stable return since debt instruments are less prone to fluctuations than equity. However, a small portion of equity means that the fund will give a higher return when the market is in a bull phase.

Aggressive Hybrid Fund:

An aggressive hybrid mutual funds investment means a majority of the funds are invested in equity instruments. The balance is put in debt instruments. The debt instruments act as return stabilizers when the market is in a bear phase. The overall return of the fund will be positive even when the market is falling because the debt instruments will give a positive return.

Conservative Hybrid Funds are perfect for investors who do not want to take a higher risk by investing in equities. For those who already have a fixed income portfolio, hybrid funds provide some risk diversification.

On the other hand, Aggressive Hybrid Funds provide a safer alternative for people who invest majorly in equity instruments since the risk from a hybrid fund is lower because of the fixed debt component.

The reason to pick hybrid mutual funds investment is that it offers a mix of both equity and debt in your portfolio. If your portfolio is heavily balanced towards either equity or fixed income instruments, you can opt for this mutual fund and balance the risks. However, do not put all your funds in a hybrid fund. Depending on your risk tolerance and investment goals, you need to pick separate strategies and invest in mutual fund online accordingly.

It is possible to invest online in mutual fund either through:

• The mutual fund website directly
• Through intermediaries
• Through agents
• Through the demat account