Hybrid funds invest in both equity securities and debt instruments depending on the investment objective. These funds are ideal for investors who aim for diversification of funds, risk, and return.
Till Date CAGR
|Edelweiss Balanced Advantage Fund (G)|
|ICICI Prudential Equity & Debt Fund (G)|
|Tata Balanced Advantage Fund (G)|
|ICICI Prudential Regular Savings Fund (G)|
|Sundaram Equity Savings Fund (G)|
|HDFC Hybrid Debt Fund (G)|
|HDFC Balanced Advantage Fund (G)|
|UTI Hybrid Equity Fund (G)|
|HDFC Equity Savings Fund (G)|
|ICICI Prudential Balanced Advantage Fund (G)|
|HDFC Hybrid Equity Fund (G)|
|UTI Equity Savings Fund (G)|
|Baroda BNP Paribas Balanced Advantage Fund (G)|
|Mirae Asset Equity Savings Fund (G)|
|Mahindra Manulife Equity Savings Fund (G)|
|Aditya Birla Sun Life Savings Fund (G)|
|ICICI Prudential Multi Asset Fund (G)|
|DSP Saving Fund (G)|
|Bank of India Mid & Small Cap Equity & Debt Fund (G)|
|Kotak Equity Hybrid fund (G)|
Hybrid funds invest in both equity as well as debt instruments. This mix is for diversification of funds, risk, and return. Equity mutual funds invest in shares and stocks of other companies. It has the potential of higher return but also carries a high risk in comparison of debt mutual funds. Debt mutual funds invest in debt securities, treasury bills, corporate bonds. It provides a regular income to the investor and carries a low risk.
Both the mutual funds have their own pros and cons. Hybrid funds mix both the funds and aims to generate higher returns in exchange for lower risk depending on the investment goals of the investors. Investors who are seeking good returns at moderate risk can invest in hybrid mutual funds
These funds are suitable for investors seeking good returns at moderate risk.
Below are the types of hybrid funds depending on the asset allocation towards equity securities and debt instruments.
There are 2 goals of any hybrid fund, capital appreciation in the long term and higher return in the short term. To achieve these 2 goals hybrid funds pick a mix of equity and debt.
Investing in equity provides capital appreciation and stability to the funds invested. Investment in debt instruments provides returns in the form of dividends and interests. Hybrid fund managers do asset allocation, market analysis, diversification of funds to ensure risk, return and capital appreciation are in place.
Asset allocation means allocating funds to different classes of assets available in the market i.e. bonds, bills, gold, etc.
Diversification of funds is a process in which the asset is chosen is such a manner to balance the risk and return matching the investment goals.
Equity mutual fund schemes provide returns with higher risk, ideal for investors who don’t mind taking the risk of capital and expect inflation-beating returns over the long term.
Debt mutual fund schemes offer regular and lower return with lower risk, ideal for investors who don’t want to take high risk and accept lower returns
Hybrid funds combine the risk and return both the funds offer and provide a blend of risk and return. The fund management involves risk management, portfolio diversification, and asset allocation. This is the reason why it is ideal for investors who look for a balance of risk and rewards.
The investment can be made in 2 ways, either through a lump-sum investment or SIP
One can calculate their potential mutual fund returns through different mutual fund calculators. For estimating SIP returns, one can use the SIP calculator. And for lumpsum returns, one can use the lumpsum mutual fund calculator.
Since Hybrid funds invest in both equities and debt securities, the tax treatment for these funds depends on the asset allocation of the funds. All hybrid funds with an exposure of 65% or more to equities are treated as equity funds. And the rest are treated as debt funds.
For mutual fund schemes, the holding period of investments is very important for tax purposes.
For an equity hybrid fund, if an investment holding period is less than one year, then it is a short term investment. And the gains arising out of it are Short Term Capital Gains (STCG). These are taxable at 15% per annum (plus 4% cess).
For investments with holding period for more than one year, then it is a long term investment. And the gains arising out of it are Long Term Capital Gains (LTCG). These are taxable at 10% per annum (plus 4% cess), only if the gains are above INR 1 lakh.
For investments with holding period less than three years, are short term investments. And the Short Term Capital Gains (STCG) are taxable as per the income tax slab rate (plus 4% cess). For investments with holding period more than three years, the Long Term Capital Gains (LTCG) are taxable at 20% with indexation benefit.
As per the Finance Bill 2023, debt mutual funds will no longer have the LTCG benefit. Thus, from April 1st 2023, capital gains from debt fund investments will be taxed as per the investor’s Income Tax slab rate.
Additionally, there is a Dividend Distribution Tax (DDT) on dividend funds. From April 1st, 2020, dividends are taxable in the hands of investors. Dividends earned are subject to tax according to the income tax slab rate. Also, dividends above INR 5,000, attract 10% TDS.
Additionally, equity mutual funds are subject to securities transaction tax is 0.001% if investors sell their holdings.
You may also like to read about Balanced Fund Vs Equity Fund