Top 10 Hybrid Mutual Funds & How to Invest

Key Highlights

• Hybrid mutual funds, also known as balanced funds, are a type of mutual fund that invests in a mix of equity and debt instruments.

• There are several advantages to investing in hybrid mutual funds such as Diversification, Professional Management and Regular Income.

• When selecting a hybrid mutual fund, consider the factors such as Investment Objective, Asset Allocation, Fund Expense Ratio and Past Performance.

Investing can be daunting especially when you don’t have time for research. You want to see your money grow, but the thought of high-risk ventures can be unsettling. Hybrid mutual funds offer a solution. They combine the growth potential of equity (stocks) with the stability of debt (bonds) to create a balanced investment approach. This article explores everything you need to know about hybrid mutual funds, including their benefits, different types, taxation implications, and even some top performers in the market.

What Are Hybrid Mutual Funds?

Hybrid mutual funds, also known as balanced funds, are a type of mutual fund that invests in a mix of equity and debt instruments. The specific allocation between these asset classes varies depending on the fund's objective. Some hybrid funds may lean more towards equity, targeting capital appreciation, while others may be debt-heavy, prioritizing regular income and stability. This flexibility allows investors to choose a fund that aligns with their risk tolerance and financial goals.

Why Consider Hybrid Mutual Funds?

There are several advantages to investing in hybrid mutual funds:

• Diversification: Hybrid funds offer built-in diversification, a cornerstone of successful investing. By combining equity and debt, they reduce portfolio risk compared to pure equity funds. When the stock market dips, the debt component can help cushion the blow.

• Balanced Approach: Hybrid funds cater to a wide range of investors. Risk-averse individuals can opt for debt-heavy funds for steadier returns, while those comfortable with some volatility can choose equity-centric options for potentially higher growth.

• Professional Management: Like all mutual funds, hybrid funds are managed by experienced professionals who research and select investments. This allows investors to benefit from expert insights without the need for individual stock picking.

• Regular Income: Some hybrid funds, particularly those with a higher debt allocation, distribute regular dividends derived from the interest earned on their holdings. This helps investors with a continued source of income.

Top 10 Hybrid Mutual Funds Based on 5-Year Performance

While past performance is not indicative of future results, some hybrid mutual funds have consistently delivered strong returns. It's important to note that this is not an exhaustive list and is for informational purposes only. Investors should conduct their research and consult a financial advisor before making any investment decisions:

Name	1Y%	3Y%	5Y%	AUM (cr)	Expense Ratio%	Age
Quant Multi Asset Fund	47.40	29.68	28.18	1,829	2.01	23 years
ICICI Prudential Equity & Debt Fund	39.14	25.90	20.16	32,429	1.62	24 years
HDFC Balanced Advantage Fund - Regular Plan	38.59	25.19	17.92	79,875	1.37	24 years
Bank of India Mid & Small Cap Equity & Debt Fund	47.14	24.96	20.92	665	2.42	8 years
ICICI Prudential Multi Asset Fund	32.70	24.91	19.24	34,704	1.51	21 years
Quant Absolute Fund	37.57	23.33	23.89	1,869	2.05	23 years
JM Aggressive Hybrid Fund	49.41	23.00	18.14	223	2.31	29 years
Edelweiss Aggressive Hybrid Fund - Plan B	32.57	19.56	16.45	1,440	2.36	15 years
Edelweiss Aggressive Hybrid Fund	32.47	19.47	16.39	1,440	2.04	15 years
UTI Aggressive Hybrid Fund	31.56	19.08	15.20	5,243	1.95	29 years

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Taxes are an essential aspect of any investment. Dividends received from hybrid mutual funds are classified into two categories:

• Equity Portion: Dividends from the equity component of the fund are taxed as short-term capital gains if held for less than one year and long-term capital gains if held for over a year. Long-term capital gains often benefit from lower tax rates.

• Debt Portion: Income generated from the debt portion of the fund is taxed as interest income. This typically falls under the income tax slab of the investor.

Choosing the Right Hybrid Mutual Fund

When selecting a hybrid mutual fund, consider the following factors:

• Investment Objective: Clearly define your financial goals and risk tolerance. Are you seeking capital appreciation, regular income, or a balance of both?

• Asset Allocation: Research the fund's equity-debt ratio. Choose a fund that aligns with your risk appetite.

• Fund Expense Ratio: Lower expense ratios translate to higher returns for you.

• Past Performance: While not a guarantee of future success, past performance can offer some insight into the fund's management style and consistency.

Conclusion

Hybrid mutual funds offer a compelling option for investors seeking a balanced approach. By combining the growth potential of equity with the stability of debt, they provide diversification and the potential for steady returns. Remember, thorough research and consulting a financial advisor are crucial before investing in any mutual fund. With careful planning, hybrid mutual funds can be a valuable tool in achieving your financial goals.

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