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Why Hybrid mutual funds are called the combination of Equity and Debt assets?

Equities bring returns but are risky. Debt is stable but low on returns. What if you want to walk the middle path? What if you want returns as well as stability? If such thoughts have been keeping you up at night, you have come to the right article. 

Hybrid Funds are a type of mutual fund that is allowed to invest across multiple asset classes such as equity, debt, arbitrage positions, etc. They combine the USP of equity and debt funds while downplaying their individual weaknesses. Read on to know more.

Benefits of Hybrid Funds

The long list of benefits of hybrid funds makes them a crowd favourite. Here are the key benefits of hybrid funds and compelling reasons for their inclusion in your portfolio.

  • Balance is the name of the game

The USP of hybrid funds is that it offers the best of both worlds (i.e. equity and debt). These funds allow you to strike the perfect balance between the 2 R’s – Risk and Return. The equity exposure helps to reap higher returns while the presence of debt provides stability and softens the blow in times of volatility.

  • Something for everyone

There are six variants of hybrid funds. This, in turn, means that irrespective of your risk profile, there is a hybrid fund scheme which caters to your requirement. For instance, if you are a risk-averse investor, you can opt for conservative hybrid funds which have a higher debt and lower equity composition. For investors willing to take risks, aggressive hybrid funds are a perfect match.

  • Access to multiple asset categories

One of the biggest benefits of hybrid funds is that it provides you with a platform to access several asset categories through a single product. Hence, no need to invest in multiple funds or schemes to get the benefit of each individual asset class.

  • Diversification is their middle name

A wise person once said, if you invest and you do not diversify, it is as good as throwing out your money. Diversification is a critical risk management strategy. By bringing together two non-linked (or conversely related) asset categories – equity and debt, it helps in managing the risk quotient of your investments. Hybrid Funds help to diversify the overall portfolio across as well as within the asset categories. 

  • Stepping stone to the world of investing

The equity market can give an overwhelming experience to first-time investors. If not dealt deftly, equity investments can leave quite a sour taste for such investors and even scar them for life. Hybrid funds help these investors to take baby steps into the world of equity without getting greatly impacted by the market fluctuations. 

  • Balance and re-balance

You already know that hybrid funds help to balance the two concerns of every investor. But do you also know that the portfolio of these funds is continuously re-balanced as per the market conditions? The concerned fund managers scan the market for updates, trends or future events that may impact the fund’s performance and rebalance the portfolio whenever the need arises. This activity, if being done by you, would require significant time, effort and technical knowledge to understand the market movements.

How to invest in the best hybrid fund online?

It is human tendency to wants the maximum result with the least possible effort. So, in this case, it becomes the choice of the best hybrid fund in the easiest way possible. The perfect solution is to go through the online route. Investment portals provide you with all the required information (performance, consistency, rating, expense ratio, AUM, etc.) of all the funds in one website. They help you choose the best hybrid fund online and also complete all the necessary formalities in just a couple of clicks. e-KYC, a pre-requisite for online mutual fund applications takes lesser time than making a pot of instant noodles! Best is to go with investment portals that are completely paperless. 

Final Words

Hybrid Funds are the all-rounder of mutual funds. They combine the best features of equity and debt funds and give you a balanced investment instrument. Moreover, selecting the best hybrid fund online is extremely easy and effective. So, if you wish to grow your wealth but simultaneously manage risk, inject hybrid funds into your portfolio.


Published by Nidhi Mehra

I am blogger with 5 years of experience in writing articles and topics related to finance and funds

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