Hybrid Funds

Hybrid funds or Hybrid Mutual funds are a combination of equity and debt mutual funds which invest in a diversified portfolio of both equity and debt securities. People who have a moderate risk appetite and are looking for a diversified portfolio should invest in hybrid funds rather than several individual securities. To meet the risk profile of various investors, hybrid funds are further classified into equity-oriented hybrid and debt-oriented hybrid funds, depending on their exposure. If equity exposure is over 65%, then it is said to be an equity-oriented hybrid fund. If not, it is a debt-oriented fund.
 

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What are Hybrid Funds?

Hybrid funds, also known as balanced funds, are investment portfolios that combine both stocks and fixed-income securities. This dual approach offers investors a diversified strategy, harnessing the growth potential of equities and the stability of fixed-income instruments. Managed by financial professionals, hybrid funds cater to different risk preferences and provide a balanced approach for investors seeking both capital appreciation and income generation.

 

Why add Hybrid Funds to your portfolio?

  • Diversification: Hybrid funds combine stocks and fixed income for risk spread.
  • Balanced Risk: Offers a balanced approach for both growth and stability.
  • Steady Income: Provides reliable income from the fixed-income component.
  • Professional Management: Expert-managed for optimized returns.
  • Flexibility: Adaptable asset allocation for varying market conditions.

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Advantages of investing in Hybrid Funds

Hybrid funds offer diversification, balanced risk-return, and professional management for a well-rounded investment strategy.

  • Diversified Portfolio

    Hybrid funds offer a diversified investment strategy by combining both stocks and fixed-income instruments, spreading risk across different asset classes.

  • Balanced Risk-Return Profile

    These funds provide a balanced approach to risk and return, catering to investors seeking both capital appreciation and income generation.

  • Professional Management

    Managed by financial experts, hybrid funds benefit from professional expertise in optimizing the portfolio for a well-rounded and balanced investment approach.

Who should invest in Hybrid Funds?

Hybrid funds are for moderate risk-tolerant, income-seeking, and long-term investors seeking a balanced investment approach.

  • Moderate Risk Tolerance

    Suitable for investors with a moderate risk tolerance, seeking a balanced mix of growth and stability in their portfolio.

  • Income-Seeking Investors

    Ideal for those looking for a reliable income stream alongside potential capital appreciation.

  • Long-Term Investors

    Suited for long-term investors who appreciate the benefits of diversification and a balanced risk-return profile.

Points to consider before investing in Hybrid Funds

Before investing in hybrid funds, consider asset allocation, expense ratios, manager expertise, market conditions, investment horizon, and risk appetite.

  • Asset Allocation

    Understand the fund's allocation between stocks and fixed-income securities, ensuring it aligns with your risk tolerance and investment goals.

  • Expense Ratios

    Consider the expense ratios to ensure cost-effectiveness and to prevent significant erosion of returns over time.

  • Fund Manager Expertise

    Assess the expertise and track record of the fund manager in managing both equity and fixed-income components.

  • Market Conditions

    Stay informed about prevailing economic conditions and market trends, as these factors can impact the performance of both asset classes.

  • Investment Horizon

    Align your investment horizon with the fund's objectives, as the balance between growth and stability may change over different time frames.

  • Risk Appetite

    Evaluate your risk appetite, as hybrid funds cater to various risk preferences through different allocation models.

Limitations of Investing in Hybrid Funds

Hybrid funds may offer moderate returns, add complexity, and expose investors to risks from both equity and fixed-income markets.

  • Moderate Returns

    Hybrid funds may offer moderate returns compared to pure equity funds, limiting potential for high growth.

  • Complexity

    The dual nature of hybrid funds can add complexity, making it challenging for some investors to understand and manage.

  • Market Risks

    The performance of hybrid funds is influenced by both equity and fixed-income markets, exposing investors to risks associated with both asset classes.

How to Start Investing in Hybrid Funds with INDmoney

After you have understood what Hybrid Mutual Funds are, it is time for you to start your investment process with INDmoney. Below are some simple steps to follow to start your mutual fund's investment journey with us.

  • Step 1

    Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).

  • Step 2

    Once your Free investment account is ready, you can either search for Hybrid Mutual Funds or go to the mutual fund section and tap on Hybrid Mutual Funds.

  • Step 3

    Choose a Hybrid Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, Expense ratios and underlying stocks and sectors.

  • Step 4

    You can choose to set up SIP in Hybrid Mutual Funds or even invest as lumpSum. Once you are on the individual Hybrid Mutual Funds page click from the bottom “One-time” for lump sum investment or “SIP” for systematic investment plan.

  • Step 5

    Choose the amount that you want to invest as SIP or LumpSum. 

  • Step 6

    Set up payments. If you choose to set up SIP in Hybrid Mutual Mutual Funds,  you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lumpsum (one-time) then you can pay via UPI, netbanking, NEFT or RTGS.

Should you invest in Hybrid Funds?

Investing in hybrid funds is advisable for those seeking a balanced risk-return profile, moderate returns, and income stability. However, potential complexities and exposure to both equity and fixed-income market risks should be carefully considered. Assess your risk tolerance, investment goals, and market conditions to determine if hybrid funds align with your financial strategy.

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Frequently Asked Questions

Hybrid funds combine stocks and fixed-income instruments for a diversified investment strategy.

These funds blend equities and fixed income to offer a balanced risk-return profile for investors.

Hybrid funds come in various types, such as aggressive, conservative, and balanced, catering to different risk preferences.

Advantages include diversification, a balanced risk-return profile, and professional management for optimized returns.

Hybrid funds are suitable for moderate risk-tolerant investors seeking a balanced investment approach and steady income.

Risks include moderate returns compared to pure equity funds, added complexity, and exposure to both equity and fixed-income market risks.

Consider factors like asset allocation, expense ratios, fund manager expertise, market conditions, investment horizon, and your risk appetite when selecting a hybrid fund for your portfolio.

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