Hybrid funds are mutual funds that invest in a mix of assets such as equity, debt, and sometimes gold or other instruments. They balance risk and reward by diversifying investments across different asset classes. It is one of the categories that .
Types of Hybrid Funds:
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Aggressive Hybrid Funds:
- Allocate 65–80% to equity and the rest to debt.
- Higher risk due to the larger equity portion, suitable for conservative investors transitioning from fixed-income products.
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Balanced Advantage/Dynamic Asset Allocation Funds:
- Use models to adjust equity and debt allocations based on market conditions.
- Typically, up to 35% in debt and the rest in equity/arbitrage.
- It has the highest Assets Under Management (AUM) with HDFC Balanced Advantage Fund leading the pack with Rs 95,546 crore (Nov 2024)
- These are based on benchmark indices like NIFTY 50 Hybrid Composite debt 50:50 Index & CRISIL Hybrid 50+50 Moderate Index
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Multi-Asset Allocation Funds:
- Invest in at least three asset classes (e.g., equity, debt, gold).
- Flexible allocations based on market trends, with some investing in international equities or real estate investment trusts (REITs).
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Equity Savings Funds:
- Split among equity, debt, and arbitrage opportunities.
- Conservatively manage unhedged equity (10–25%).
Tax Benefits:
- Most are taxed as equity funds, making them attractive for high-net-worth individuals.
- Long-term gains (>1 year): Taxed at 12.5%.
- Short-term gains: Taxed at 20%.
Suitability:
- Ideal for:
- Conservative investors seeking simplicity.
- Those transitioning from fixed-income products.
- Moderate-risk investors with at least a 5-year horizon.
Source - CNBC-TV18, Oct 2024