Investments fall into three categories: equity (or high risk), debt (or low risk), or hybrid. Investment advisers advise clients to develop an investment strategy based on their financial objectives, risk tolerance, and time horizon. Hybrid mutual funds fill this gap, with key characteristics to consider before investing.

Let us quickly go through some crucial points regarding hybrid mutual funds.

What Are Hybrid Mutual Funds?

To start with, let’s first get a clear answer to the question, ‘what are hybrid funds?’ As their name implies, hybrid funds combine equity and debt investments to achieve the scheme’s investment goal. The equity and debt ratios in each hybrid fund vary, making them suitable for various kinds of investors.

How Does A Hybrid Fund Work?

A hybrid fund builds a balanced portfolio to provide its investors with consistent income and long-term financial growth. The fund manager divides the funds among stock and debt instruments in varying ratios, building a portfolio by the scheme’s investment goal. Furthermore, the fund manager will purchase or sell assets if market movements are favourable.

To Whom Should A Hybrid Mutual Fund Be Offered?

Hybrid funds are considered riskier than equity funds, but offer better returns than debt funds. Low-risk investors favour them and novice investors often choose them. With hybrid funds, investors can get the most return while protecting themselves from market volatility.

What Are The Types Of Hybrid Mutual Funds?

Knowing about the hybrid mutual funds early on can help investors make the right choice. Here we go:

1.      Equity-Oriented/Aggressive Hybrid Fund: Aggressive funds are equity-oriented mutual funds that invest more in stocks than bonds, making them suitable for risk-takers looking to increase returns. They usually invest 60-65% of their investible corpus in equity and 35-45% in debt.

2.      The conservative/debt-oriented hybrid fund: This fund is a good choice for conservative investors, assigning 60% to debt and 40% to stocks. It also invests in cash, currency equivalents, or liquid funds to increase its liquidity.

3.      Balanced Hybrid Funds: A form of a balanced fund distributes money in roughly equal amounts to equity and debt classes. They equally split their money between stocks and fixed-income securities, making it a safe route for capital growth with minimal danger.

Benefits Of Hybrid Mutual Funds

• Diversification: Due to their investments in a portfolio of different asset types, hybrid funds provide the investor with the advantage of diversification. As the version of another asset class balances the performance of one asset class, this can help reduce risk by stabilizing returns.
• Convenience: Depending on the type of fund and its investment goal, hybrid funds invest in various asset classes, giving investors exposure to debt, equity, gold-related instruments (including ETF), and other asset classes (as permitted). By doing this, investors avoid the hassle of investing in each asset class individually and pay less for each class-based asset fund.
• Advantages of various asset types: Hybrid funds take advantage of each asset class’s advantages because they invest in numerous asset classes. Depending on the type of fund, these investments in equity, the stability and reduced volatility of debt funds, the perceived safety of gold, and the high liquidity provided by cash all have the potential to produce long-term capital appreciation.

Factors That Matter While Investing in Hybrid Mutual Funds

Before making the final investment, it is crucial to check out the most important factors that matter in hybrid mutual fund investments.

The Risk Return Assessment

Hybrid funds carry out investment risk about the distribution of assets in their portfolio. Therefore, it’s crucial to thoroughly analyse the scheme’s portfolio to comprehend the dangers involved fully.

For instance, you must consider the types of stocks the fund holds if you are investing in an equity-oriented hybrid fund. Are the majority of the small/mid-caps or large caps? This aids in your better understanding of the dangers. Additionally, it will offer you a sense of the kind of returns you can anticipate.

Pick The Appropriate Hybrid Fund

Because hybrid funds come in various forms, it’s crucial to consider your risk tolerance, financial objectives, and investment timeline before selecting a strategy. Due to the additional equity component, a debt-oriented hybrid fund may provide higher returns than a pure debt fund if you require regular income. Make sure to think about these aspects before investing.

Final Thoughts:

As you are thinking of investing in hybrid mutual funds? Edelweiss hybrid mutual fund is the best option for you as the company has become one of India’s newest and fastest-growing AMCs since its inception.

Edelweiss MF is an investment that seeks to provide you with both the stability of debt investments and the development of equities. 68.36% of the fund’s assets are invested in domestic equities, of which 47.76% are large-cap stocks, 6.5% are mid-cap stocks, and 5.87% are small-cap stocks.9.5%.

Along with foreign fund of fund schemes and exchange-traded funds, it provides a wide variety of mutual fund schemes in the equity, debt, and hybrid categories. Those planning for serious investments can definitely opt for Edelweiss hybrid funds.