Hybrid fund, also called Asset Allocation fund, is characterized by assortment among two or more asset classes. As the name suggests it’s a mix of both debt and equity investment. As per SEBI, hybrid funds are divided into seven categories. Among that Conservative Hybrid Fund, Balanced Hybrid Fund, Aggressive Hybrid fund are most- well-liked among the investors. Investors are very cautious in investing hybrid funds because of equity exposure. But hybrid funds also invest in debts. Conservative hybrid funds invest about 70 to 80% in debt while balanced and aggressive hybrid funds invest 40 to 60% and 20 to 35% respectively in debt.
Working of hybrid funds
Hybrid funds try to create a balanced portfolio to supply regular income to its customers together with the good thing about capital appreciation within the long run. The funds are allocated in varying proportions in both equity and debt instruments. The debt components in hybrid funds are preferred by investors with low-medium risk palate. As they need a mixture of equity and debt, they’re ready to provide better returns. The debt component always offers stability and therefore the equity component will lookout for higher returns.
Even though hybrid funds are considered to be riskier they’re also safe in comparison to equity funds. They provided better returns and lots of low investors prefer this. New investors usually turn towards hybrid funds as they’re dithering with equity funds.
Factors to be considered before investing in hybrid funds
• Risk factor: Even though risk exists, it is lesser than the pure equity funds. Do exercise caution and portfolio regularly.
• Cost: This fund normally charges a fee for managing the portfolio referred to as expense ratio. Make sure that the expense ratio is lower compared to other mutual funds, before investing in it.
• Investment horizon: hybrid funds are more suitable for the medium-term horizon and goals like funding for instruction and buying a car will be met with this fund.
How to invest in hybrid funds
Investment in hybrid funds may be done through clear tax during a hassle-free manner without the employment of paper.
The steps to follow are:
• Create an account in ClearTax.in by providing the required details.
• Get your e-KYC done
• Invest in your preferred hybrid funds.
