A COMPREHENSIVE GUIDE TO HYBRID MUTUAL FUNDS

A Comprehensive Guide to Hybrid Mutual Funds

A Comprehensive Guide to Hybrid Mutual Funds

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Hybrid mutual funds are an excellent choice for investors seeking a balanced approach to wealth creation. These funds invest in a mix of equity, debt, and other asset classes, offering a combination of growth and stability. By blending various asset types, hybrid funds cater to investors with diverse risk appetites and investment goals.


In this article, we’ll delve into what makes hybrid mutual funds unique, explore their categories, benefits, and some top-performing funds in 2025.

What Are Hybrid Mutual Funds?


Hybrid mutual funds allocate their investments across multiple asset classes, such as equities, fixed-income instruments, and sometimes gold or real estate. The primary objective is to strike a balance between risk and return. Depending on the allocation ratio, these funds can range from being aggressive to conservative.

Types of Hybrid Mutual Funds



  1. Equity-Oriented Hybrid Funds:

    • Invest at least 65% in equities and the rest in debt instruments.

    • Suitable for investors with moderate to high-risk tolerance.



  2. Debt-Oriented Hybrid Funds:

    • Allocate a larger portion (over 60%) to debt securities and a smaller portion to equities.

    • Ideal for conservative investors seeking stable returns with limited exposure to equities.



  3. Balanced Advantage Funds:

    • Dynamically adjust equity and debt allocation based on market conditions.

    • Suitable for investors seeking flexibility and balanced risk.



  4. Multi-Asset Funds:

    • Invest in three or more asset classes, such as equity, debt, and gold.

    • Ideal for diversifying across multiple asset types.



  5. Arbitrage Funds:

    • Exploit price differences between equity and derivatives markets for low-risk returns.

    • Suitable for risk-averse investors seeking short-term stability.




Benefits of Hybrid Mutual Funds



  1. Diversification: Exposure to multiple asset classes reduces portfolio risk.

  2. Balanced Risk-Return: Combines the growth potential of equities with the stability of debt.

  3. Professional Management: Managed by experienced fund managers who optimize allocation.

  4. Flexibility: Options to choose from aggressive, balanced, or conservative funds based on goals.

  5. Tax Efficiency: Equity-oriented hybrid funds benefit from favorable tax treatment similar to equity funds.


Top Hybrid Mutual Funds for 2025



  1. ICICI Prudential Balanced Advantage Fund

    • Fund Manager: Sankaran Naren

    • 3-Year CAGR: 14.2%

    • Expense Ratio: 0.99%



  2. HDFC Hybrid Equity Fund

    • Fund Manager: Chirag Setalvad

    • 3-Year CAGR: 15.5%

    • Expense Ratio: 1.20%



  3. Axis Triple Advantage Fund

    • Fund Manager: Jinesh Gopani

    • 3-Year CAGR: 12.8%

    • Expense Ratio: 0.85%



  4. SBI Equity Hybrid Fund

    • Fund Manager: R. Srinivasan

    • 3-Year CAGR: 13.9%

    • Expense Ratio: 1.02%



  5. Mirae Asset Hybrid Equity Fund

    • Fund Manager: Neelesh Surana

    • 3-Year CAGR: 14.7%

    • Expense Ratio: 0.80%




Factors to Consider When Investing in Hybrid Funds



  1. Investment Objective: Align the fund type with your financial goals.

  2. Risk Appetite: Choose equity-heavy funds for growth or debt-heavy for stability.

  3. Time Horizon: Ensure the investment duration matches the fund’s risk profile.

  4. Expense Ratio: Opt for funds with lower expense ratios to maximize returns.

  5. Performance History: Review historical returns and consistency.


Tax Implications



  • Equity-Oriented Funds: Gains from units held for less than 1 year are taxed at 15%, and long-term gains above ₹1 lakh are taxed at 10%.

  • Debt-Oriented Funds: Gains from units held for less than 3 years are taxed as per the investor’s income tax slab, while long-term gains are taxed at 20% with indexation benefits.


Who Should Invest in Hybrid Mutual Funds?



  1. First-Time Investors: A great entry point for those new to mutual funds.

  2. Moderate Risk Takers: Ideal for those seeking a balance between growth and stability.

  3. Diversified Portfolios: Complements portfolios that need exposure to both equity and debt.


Final Thoughts


Hybrid mutual funds offer a versatile investment option, catering to a wide range of investor profiles. By combining the growth potential of equities with the stability of debt, these funds can help you achieve your financial objectives while managing risk effectively. Choose funds that align with your goals, risk tolerance, and investment horizon to make the most of this dynamic category.

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