Mutual Funds are an investment tool that offers you inflation-beating returns. They primarily invest in Equities and Debts. The choice of an asset depends on your investment goal and risk appetite. If you want to earn high returns, invest in Equities. If you are a risk-averse investor looking to make reasonable returns, invest in Debts. But are you willing to take on some risk and aim for higher returns?
In that case, you should consider investing in Hybrid Funds. This guide should help you.
What are Hybrid Mutual Funds?
They are a type of Mutual Fund that mixes Equities and Debt. You can choose to invest in both. The Debt investment of your fund manages your risk appetite. Equities allow you to make the most of favorable market standing. This makes it a balanced investment option. Hybrid Funds are a better investment choice than Equities. Any conservative or budding investor willing to bear some Equity exposure should grab this investment opportunity.
What are the types of Hybrid Mutual Funds?
There are different Hybrid Mutual Funds based on the concentration of assets you invest in. Let us understand them:
- Equity-Oriented Funds: This has an Equity exposure of 65%. There is a range of Equities and other market-linked instruments you can choose to invest in here.
- Debit-Oriented Funds: They predominantly invest in Money Market instruments. Here again, the proportion rule of 65% of Debt exposure is followed.
- Monthly Income Plan: If you want to generate a monthly income, opt for this Mutual Fund Investment. They focus more on Debt investment while having an Equity exposure of 15-20%.
- Arbitrage Funds: Here, your fund managers buy stocks at a lower price from one market and sell them at a higher price in another market. This trading helps to maximize your investment returns.
Things to consider when investing in Hybrid Mutual Funds
Thinking through every investment option before opting for it is necessary. You need to know if the investment vehicle will earn you desirable returns. Consider the following points when investing in Hybrid Funds:
- Returns: Mutual Fund returns are not guaranteed. They depend on the market standing. Hence, watch the market and modify your investment whenever required.
- Risk involved: Maximum people overlook the risk associated when investing in Hybrid Funds. Remember, though comparatively lesser, they involve a certain degree of risk. Invest in them if you have a reasonable risk appetite. Invest via a Systematic Investment Plan to adjust the risk involved.
- Investment horizon: Given their asset allocation, Hybrid Funds are suitable for meeting medium-term goals. Stay in the investment for at least five years to earn good returns.
