Home : About us : Blog

Everything You Need to Know About Hybrid Funds

About Hybrid Funds

A ‘hybrid’ of something in a literal sense would result from combining two different elements. But do you have any clue on what a hybrid mutual fund is?

A hybrid fund allows you to invest in equity and debt instruments through a single fund. Therefore, they are also called multi-asset funds. Furthermore, there are types of hybrid funds formed with different debt-equity combinations that address various types of investors.

Let’s look at everything you need to know about hybrid funds as we answer three simple questions.

What are the types of hybrid funds?

Here are a few popular types of hybrid funds:

  • Equity-oriented hybrid funds invest between 65%to 80% of their total assets in equities and equity-related instruments. The remaining percentage is invested in debt-based and money market instruments. They are also known as aggressive hybrid funds.
  • Debt-oriented hybrid funds, on the other hand, invest between 75% to 90% in debt-based instruments and between 10% to 25% in equity and equity-based assets. Debt-oriented hybrid funds are also called conservative hybrid funds.
  • Balanced funds follow a 40% and 60% combination between equity and debt.
  • A balanced advantage fund is a dynamic asset allocation fund where investments in equity and debt counterparts are dynamically managed.
  • Arbitrage funds play upon the price difference by simultaneously buying and selling assets.

What are the benefits of investing in hybrid funds?

Now that you know the different types of hybrid funds, let’s look at the benefits of investing in them:

  • By investing in hybrid funds, you can get the best of both equity and debt. You can get the wealth creation feature of equity and the stability aspect of debt together by investing in a single fund.
  • Since the fund is composed of equity and debt instruments, it adds diversification to your investments.
  • Hybrid funds can be a suitable option for investors who want to enter equity-based investing with a lower level of volatility. This is because the debt component of the fund lowers volatility and brings stability to your investment.
  • Furthermore, with just a SIP (Systematic Investment Plan), you can invest in equity and debt securities.

What are the factors you should consider when investing in hybrid funds?

Though there are multiple benefits of investing in hybrid funds, there are also a few things you should be careful about.

Here are some things to consider:

  • The degree of risk involved in hybrid fund investing is aligned to the asset allocation of the fund. Therefore, it can help to look at the composition of the fund. For example, you can look at the stocks it invests in. You can look at whether they are large-cap, mid-cap or small-cap businesses.
  • You can also analyse your own goals according to their timelines and risk appetite and check if it aligns with your hybrid fund investments. To get a better idea of this, you can seek professional financial advice as well.

With the points mentioned above, you can see that hybrid funds can offer you the best of both equity and debt investments. They can help you reach financial goals that align with the risk and return aspect of the fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

chatbot icon
Declaration

The information and data contained in this Website do not constitute distribution, an offer to buy or sell or solicitation of an offer to buy or sell any Schemes/Units of Tata Mutual Fund, securities or financial instruments in any jurisdiction in which such distribution, sale or offer is not authorised. The material/information provided in this Website is for the limited purposes of information only for the investors. In particular, the information herein is not for distribution and does not constitute an offer to buy or sell or solicitation of an offer to buy or sell any Schemes/Units of Tata Mutual Fund, securities or financial instruments to any person in the United States of America ('US')/Canada.

Currently, the funds of TATA Mutual Fund have not been registered under the United States Securities Act of 1933 (the 'Securities Act') or under the securities laws of any state and the funds have not been registered under the Investment Company Act of 1940 (the 'Investment Company Act') of the United States. Units in the funds are therefore not being offered or sold within the United States/ Canada or to United States/ Canadian Persons.

By entering this Website or accessing any data contained in this Website, I/We hereby confirm that I/We am/are not a U.S. person, within the definition of the term 'US Person' under the US Securities laws/resident of Canada. I/We hereby confirm that I/We are not giving a false confirmation and/or disguising my/our country of residence. I/We confirm that Tata Mutual Fund/Tata Asset Management Limited (TATA AMC) is relying upon this confirmation and in no event shall the directors, officers, employees, trustees, agents of TATA AMC associate/group companies be liable for any direct, indirect, incidental or consequential damages arising out of false confirmation provided.