What are Hybrid Funds?

So, you’re a budding investor who wants to get a taste of the equity funds market. But, you’re still averse to the market risks this entails. Is there a way to earn high returns without exposing yourself to a high level of risk? Yes! By including hybrid mutual funds in your investment portfolio, you can reduce your risk level while still enjoying handsome returns.

What are hybrid funds?

Offering the best of both worlds, hybrid mutual funds invest their assets in both debt-based and equity funds. The purpose of doing so is to ensure that the investor receives higher returns than regular debt funds without facing as much risk as is involved in equity funds.

The choice of investing in a hybrid fund will depend upon your risk profile and investment objective.

Additional Read: How and where to keep an Emergency Fund?

Types of hybrid funds

Now that we’ve answered the question, “What is hybrid mutual fund?” let us understand its different types. Hybrid funds can be further classified on the basis of asset allocation.

Debt-oriented hybrid funds

A hybrid fund is called a debt-oriented fund when more than 65% of its assets are invested in debt-based instruments. These funds are your ideal if you want to ensure stable returns and optimise risk. Debt-oriented hybrid funds are the most suitable for investors with a low-to-moderate risk appetite.   

Equity-oriented hybrid funds

Similarly, a hybrid fund is known as an equity-oriented fund when more than 65% of the fund assets are invested in equity shares of a company and the rest in debt funds or other money market instruments. You must invest in these funds if you have a good risk appetite and are aiming at higher returns.

Additional Read: Investing in different asset classes based on their risk

Benefits of investing in hybrid funds

Hybrid funds offer the following advantages –

• You can access multiple asset classes by investing in a single fund.
• It’s possible to ensure active risk management based on your risk profile through asset allocation and portfolio diversification.
• These funds cater to varying risk profiles – from conservative to moderate to aggressive.
• Rebalancing of the portfolio may adjust the asset allocation within the permissible limit, making it possible to sell an asset class in a bull market and buying when the market is low (bearish).
• You can either invest a lump-sum in hybrid funds or take a systematic approach by investing via Systematic Investment Plans (SIPs) on a monthly basis.
• Hybrid funds can churn good returns for their investors with different investment horizons in mind – you can invest long-term to build a healthy corpus or short-term via a balanced portfolio.

How to find the best hybrid fund

Searching for the best hybrid fund can now happen from exactly where you are! Use Tata Capital’s Moneyfy app to compare different funds based on your requirements – risk appetite, investment objective and horizon, and more. Browse through top-rated mutual funds as rated by Morningstar and Value Research.

So, why wait? Begin your journey as a mutual fund investor with Moneyfy today!