Hybrid mutual funds are a combination of both Equity and Debt instruments and investors can invest in both. Assets are modified and allocated by fund managers to reduce risk levels so as to benefit investors.
Hybrid Mutual Funds are riskier than debt funds but safer than equity funds.
Types Of Hybrid Mutual Funds
These are some of the types of Hybrid Mutual Funds –
1. Equity-Oriented Mutual Fund: These funds invest 65% of the total assets in equities of companies across various sectors. The remaining 35% is invested in debt securities and Monthlother financial instruments.
2. Debt-Oriented Mutual Fund: These funds invest 60% of their assets in fixed-income securities like bonds, debentures, government securities, etc. The remaining 40% is invested in equity.
3. Monthly Income Plans: These funds primarily invest in fixed income securities and allot a small corpus to equity funds. These funds generate better returns and grant investors a steady income.
4. Arbitrage Funds: These funds buy stocks at a lesser price and sell them at a higher price. They are as safe as debt funds.
Advantages of Hybrid Mutual Funds
These are the main advantages of investing in Hybrid Mutual Funds –
1. Lower Volatility: Equity Funds are subjected to fluctuations. If the market is volatile, investors may be tensed and may opt-out from further investments. However, in the case of hybrid funds, a debt component offers stability ensuring stable returns to investors.
2. Higher Returns: In the past few years, the returns of Hybrid Funds have outperformed equity funds and large-cap funds.
3. Systematic Investment Plan (SIP): A hybrid mutual fund allows you to invest small sums of money through SIP every month depending on how much you can save.