Hi there! Welcome to Gift-Nifty, where you can explore what is Hybrid Mutual Funds. In the past few years, hybrid mutual funds have become a flexible and popular choice for investors who want a good mix between risk and return.
Hybrid mutual funds put their money into a variety of types of assets, such as stocks and bonds. Investors get the best of both worlds this way.
This piece will go into more depth about what hybrid mutual funds are to help you understand them better. Let’s begin.
Hybrid Mutual Funds
Balanced funds, which are another name for hybrid mutual funds, invest in both debt and stock assets to keep the portfolio balanced.
The goal of the mutual fund group is to lower the risk of investing in stocks and raise the stability of fixed-income instruments.
In simple terms, these funds provide a flexible way to accumulate wealth that meets the wants of investors whose risk tolerance is average.
Types of Hybrid Funds
Here are the different types of hybrid mutual funds:
Conservative Hybrid Funds
Conservative combination funds are made for investors who want to take less risk. Debt securities make the portfolio more stable because these funds usually put a big chunk of their total holdings into them.
Aggressive Hybrid Funds
These funds are made for buyers who are okay with taking on more risk in exchange for a higher return. Aggressive Hybrid Funds try to grow their capital by investing mostly in stocks and having a small amount of debt.
Balanced Hybrid Funds
To find a balance, these funds put both debt and stock investments in their portfolios. Balanced Funds’ main goal is to find a good mix between risk and return so that they can meet the needs of most investors.
Arbitrage Hybrid Funds
Arbitrage funds are a type of blend fund that was made to take advantage of the differences in prices between markets. This kind of market can be for cash or for derivatives.
By taking advantage of flaws in the market, these funds hope to make money with less risk.
Fees Involved in Hybrid Mutual Funds
Before putting money into any of the investment choices, you need to know and understand the fees that come with them. There may be fees for hybrid mutual funds, just like there are fees for other mutual funds.
The following are some common fees associated with hybrid funds:
Expense Ratio
The yearly costs of running and managing the mutual fund are part of the expense ratio. It comes with extra costs like management fees, running costs, and more.
Transaction Fees
Some combination funds may charge transaction fees when you buy or sell mutual fund units. Most of the time, these fees are paid to cover the costs of processing transactions. They are not included in the expense ratio.
Some mutual funds also charge fees at the start and end of the investment term. Buyers need to know about the fees that come with hybrid mutual funds because of this.
How Good Are Hybrid Fund Returns?
Now that you know what hybrid mutual funds are, let’s check out how well they do in terms of profits. Well, hybrid funds have been a safe way to make money over a long period of time.
For example, they might not do as well as pure stock funds during bull markets, but they can still do well during bear markets.
This is why hybrid funds are appealing: they give investors the safety of debt instruments and the potential gain of stocks, all of which help to make a diverse portfolio.
Advantages of Investing in Hybrid Funds
Here are the main advantages of investing in hybrid funds –
Diversification
By giving investors a well-balanced portfolio, hybrid funds help lessen the bad affects of bad performance in one asset class.
Risk management
When the market goes up and down, investors can better handle their risk when they have both debt and stock.
Flexibility
For investors with different risk tolerances and tastes, hybrid funds offer a variety of options, such as aggressive hybrid funds, conservative hybrid funds, and many more.
Also Read – Best Flexi Cap Mutual Funds To Invest In 2024 – Complete Analysis
Disadvantages of Investing in Hybrid Funds
Every investment has its pros and cons. Here are some of the drawbacks of hybrid funds –
Market Risks
Hybrid funds are vulnerable to market risks because the stock market is so volatile. The value of the fund goes down when the prices of the stocks it invests in go down.
Interest Rate Risk
Rates of interest and bond prices go down when interest rates go up. When interest rates go up, bond prices go down. Because of this, the fund’s value may go down.
Wrong fund selection
When buyers pick hybrid funds, they often base their choices on how well the funds have done in the past, which can lead to the wrong fund choice. For better decision-making, you should think about a lot of other things, like macroeconomic issues.
Top 10 Hybrid Mutual Funds
Here is the list of the top hybrid mutual funds in India.
- Quant Multi Asset Fund Direct-Growth
- Bank of India Mid & Small Cap Equity & Debt Fund Direct-Growth
- ICICI Prudential Equity & Debt Fund Direct-Growth
- HDFC Balanced Advantage Fund Direct Plan-Growth
- Quant Absolute Fund Direct-Growth
- JM Aggressive Hybrid Fund Direct-Growth
- Edelweiss Aggressive Hybrid Fund Direct-Growth
- Mahindra Manulife Aggressive Hybrid Fund Direct-Growth
- HDFC Children’s Gift Fund Direct Plan
- UTI Aggressive Hybrid Fund Direct Fund-Growth
Conclusion
Hybrid mutual funds are a flexible way to invest because they hold both stocks and bonds, so they offer a good balance of risk and return. Different people have different risk tolerances, so they come in different types, like conservative, bold, balanced, and arbitrage funds. They come with fees and market risks, but the benefits of diversification, managing risk, and being able to change your mind make them attractive. Hybrid funds are a popular choice for investors who want to grow their money in a fair way because they offer a reliable way to get steady returns.
FAQs
What are hybrid mutual funds?
Mutual funds that invest in both stocks and bonds to balance risk and profit are called hybrid funds. Diversification helps keep growth stable while lowering the risks that come with a volatile stock market.
What are the different types of hybrid mutual funds?
Conservative Hybrid Funds, Aggressive Hybrid Funds, Balanced Hybrid Funds, Arbitrage Hybrid Funds are the types of Hybrid mutual funds.
How do hybrid mutual funds perform in terms of returns?
Most of the time, hybrid funds give stable results over time. Diversified funds may not do better than pure stock funds during bull markets, but because they have a wider range of investments, they tend to do better during bear markets in terms of protection and returns.