Everything you need to know about Hybrid Mutual Funds.

Finding a suitable Mutual fund to park the hard-earned money can be hectic for a person who does not have any previous knowledge of the industry as a mutual fund offers a wide range of options to their investors. Mutual funds are categorized into various types as per the financial goals of the investors.

Equity Fund – This scheme offers a higher return, but higher returns come up with higher risks

Debt fund – This scheme offers better returns than FD with minimal risk.

Although, selecting a good scheme can be stressful and time taking for new investors. Every investor wishes to invest in a scheme where he can get a higher return with minimal risk i.e., a scheme that has benefits of both, Equity and Debt.

Well, what if I tell you there is an option available. Yes, Hybrid Funds. After reading this blog, you will get to know everything you ever wondered about Hybrid Funds. So, let’s get started!!!

What exactly are Hybrid Mutual Funds.

Hybrid Mutual Funds

Imagine two different fruit baskets, one of the different types of grapes and another of the different types of apples. Now, if I want to make a Mocktail, I will use different types of grapes and apples to make it, right?

Likewise, consider different types of grapes as Equity funds and different types of apples as Debt funds. Now, if I want to make a Hybrid Fund, I will use a Mocktail(mixture) of Equity Funds and Debt Funds. As the name suggests itself “Hybrid”, Hybrid means the combination of various funds.

Hybrid funds are the combination of equity funds and debt funds to attain the financial goals of the investors. Diversification in the fund schemes reduces the risks and offers optimal return and interest rates to the investors.

Every investor has different financial goals and that’s why hybrid funds are categorized into various subcategories to meet the financial goals of every type of investor.

Various types of Hybrid Mutual Funds available for Investors:

Hybrid Mutual Funds
  1. Conservative Hybrid Fund:   This fund has a combined portfolio of debt funds and equity funds, and the combination of these funds offers higher returns. The fund manager invests 75-90% of the total assets in high-quality debts and 10-25% of equity funds in the large-cap company’s stocks, which makes this fund lower risk and offers higher returns to its investors.
  2. Balanced Hybrid Fund:  As the name suggests itself “Balance”, the fund manager invests 40-60% in equity instruments, and the rest is in debt instruments to diversify the best portfolio for its investors. This fund keeps the balance between the equity and debt funds to ensure higher returns to their investor with minimal risks.
  3. Aggressive Hybrid Fund: In this fund, the fund manager invests 65-80% of the total assets in equity and its instruments, and the rest 20-35% is in debt securities and money market instruments.
  4. Dynamic Asset Allocation Fund: This fund is a type of Balanced fund. In this fund, the fund manager invests in various sectors like Stocks, Equity funds, real estate, bonds, etc. to gain higher returns on their investments. The fund manager keeps the balance between these investments if a market goes down of one investment then the fund manager shifts their investments to another market to keep the balance and to offer higher returns to their investors with minimal risks.
  5. Multi-Asset Allocation Fund: As the name suggests “Multi-Assets”, generally, this fund is the combination of equity funds, debt funds, and one more asset like gold, gold-instruments, real-estate, etc. Investors can invest up to 80% of these assets. As the investment is spread in various markets, that offers higher returns with minimal risks to their investors.
  6. Arbitrage Fund: In this fund, the fund manager invests in equity when they are offered at a lower price. The fund manager buys securities at spot prices and sells them at a future price to gain the returns from their difference. Suppose the fund manager does not find any opportunity. In that case, he invests in the money markets and debt securities for the short-period to gain the returns for their investors with minimal risks.
  7. Equity Savings Fund: This fund scheme invests in equity funds, debt funds, and arbitrage funds to gain optimal risks. As the equity funds come up with higher risk, but debt and arbitrage funds keep the market risks lower, so the whole portfolio is balanced. We can say this fund scheme is also balanced.

Benefits of Hybrid Mutual Funds.

Hybrid Mutual Funds
  • Balance risk and return: The biggest advantage of a hybrid mutual fund is that it allows investors to balance risk and return. The equity portion will earn better returns, and the debt part will earn steady returns at lower risk. Investors can also choose the mix of equity and debt that is suited to their needs.
  • Diversification: A balanced fund offers investors the benefit of diversification since it combines both equity and debt. When share prices go down, the debt component in these kinds of hybrid mutual funds ensures stability. So, these funds are able to withstand shocks during a bear phase. Generally, debt and equity have an inverse correlation; they move in different directions. So, having a balanced fund helps you hedge your bets.
  • Suited for first-time investors: Hybrid funds are especially suitable for first-time investors, especially in equity. They will get exposure to equity, but the risks are not too great when share prices rise and fall.
  • Systematic investment plan (SIP): Another advantage of a hybrid fund is that you can invest small amounts each month through a SIP depending on how much you can save.
  • Lower volatility: Equity funds are subject to the vagaries of the market. In a volatile market, investors could panic and opt out through redemptions. Having a debt component brings in a certain amount of stability to hybrid mutual funds, and fund managers will be able to handle redemptions better, ensuring stable returns to investors.
  • Higher returns: In some instances, hybrid funds have outperformed equity funds. Returns from hybrid funds during the past few years have been higher than large-cap funds. This is particularly true in a volatile market.
  • Lower expenses: Since most balanced funds have a fixed proportion of stocks and bonds, and fund managers tend to place their bets on large-cap stocks, there is very little need for active portfolio management. Hence, expense ratios will be on the lower side for hybrid funds.


Budding investors who are willing to get exposure to equity& debt markets may invest in hybrid funds. The presence of equity components in the portfolio offers the potential to earn higher returns. At the same time, the debt component of the fund provides a cushion against extreme market fluctuations.

Although, it is very important to choose the right Hybrid Fund which will suit your requirement and satisfy your Goals.

We at Tstock Mantra Investments by Amruta Tushar Ghone provide complete Financial Planning for an individual i.e., Mutual Funds, Insurance planning, Retirement planning, and so on.
Read more such informative blogs on our blog page, and enhance your financial knowledge. To join our free telegram channel for valuable information, https://t.me/MMTC123

1 thought on “Everything you need to know about Hybrid Mutual Funds.”

  1. Really It is a greatfull and helpful Information for all Of us. Thank you for Sharing Knowledge.

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