Investigating Hybrid Mutual Funds: Their Nature and Functioning
In the ever-evolving world of investments, hybrid funds stand out as a popular choice for many investors. These funds, which embody three fundamental philosophies - asset allocation, correlation, and diversification - offer a unique blend of equity and debt investments.
Hybrid funds are designed to balance growth potential with risk moderation, making them suitable for a medium-term time horizon, typically 3-5 years. They invest a minimum of 65 percent and a maximum of 80 percent in the equity asset class and 20 to 35 percent in the debt asset class.
By combining assets with low correlation, portfolio risk can be mitigated. For instance, assets within the same class often share similar risk sources and return factors, leading to a high correlation in returns. Conversely, assets across different classes typically display low correlation in returns.
In the aggressive hybrid category, some of the top-performing funds in India as of 2025 include the DSP Aggressive Hybrid Fund, Nippon India Aggressive Hybrid Fund, Franklin India Aggressive Hybrid Fund, and HDFC Retirement Savings Fund - Hybrid Equity Plan. The SBI Equity Hybrid Fund, with a strong 3-year consistency track record and no negative returns historically, is another notable fund. It manages assets of approximately ₹78,700 crore and invests 65%+ in equity and 20-35% in debt.
The DSP Aggressive Hybrid Fund, with a 3-year return of 16.36%, and the Nippon India Aggressive Hybrid Fund, with a 3-year return of 16.19%, offer notable 3-year returns at moderate expense ratios. The SBI Equity Hybrid Fund stands out for its long-term consistency and large asset base.
Other funds mentioned for the aggressive hybrid category with consistent returns and popularity are the Canara Robeco Equity Hybrid Fund, Mirae Asset Hybrid Equity Fund, ICICI Prudential Equity and Debt Fund, and Quant Absolute Fund.
It's important to note that dividends distributed by hybrid funds are subject to Dividend Distribution Tax (DDT). Taxation of these funds also depends on the proportion of equity and debt investments within the fund and the holding period of the investments.
For equity-oriented Hybrid Funds, short-term capital gains are taxed at 15%, and long-term capital gains exceeding ₹1 lakh in a financial year are taxed at 10%. Debt-oriented Hybrid Funds are treated similarly to debt funds for taxation purposes.
Like any other mutual funds, hybrid funds also charge a fee known as the expense ratio. Before investing, it's essential to understand the expense ratio and how it impacts your returns.
In conclusion, aggressive hybrid funds offer a balanced approach to investing, combining the growth potential of equity with the risk moderation of debt. With a variety of top-performing funds available, investors can find a hybrid fund that aligns with their risk appetite and investment goals.
- In the realm of investments, many investors opt for hybrid funds, a unique blend of equity and debt investments, due to their ability to balance growth potential with risk moderation.
- By combining assets with low correlation, portfolio risk can be mitigated in hybrid funds, as assets within the same class often share similar risk sources and return factors, leading to high correlation in returns.
- In India as of 2025, some of the top-performing aggressive hybrid funds include the DSP Aggressive Hybrid Fund, Nippon India Aggressive Hybrid Fund, Franklin India Aggressive Hybrid Fund, and HDFC Retirement Savings Fund - Hybrid Equity Plan, among others.
- It's crucial for investors to be aware that dividends distributed by hybrid funds are subject to Dividend Distribution Tax (DDT), and the taxation of these funds depends on the proportion of equity and debt investments within the fund and the holding period of the investments.
- Before investing in mutual funds like hybrid funds, understanding the expense ratio and how it impacts your returns is essential, as hybrid funds, like any other mutual funds, charge a fee known as the expense ratio.
