Are hybrid funds safe?
Hybrid funds are considered to be riskier than debt funds but safer than equity funds. They tend to offer better returns than debt funds and are preferred by many low-risk investors. Further, new investors who are unsure about stepping into the equity markets tend to turn towards hybrid funds.
| Scheme Name | Expense Ratio | 3Y Return (Annualized) |
|---|---|---|
| JM Aggressive Hybrid Fund | 0.61% | 23.74% p.a. |
| ICICI Prudential Multi Asset Fund | 0.74% | 23.31% p.a. |
| ICICI Prudential Retirement Fund - Hybrid Aggressive Plan | 0.89% | 21.07% p.a. |
| Edelweiss Aggressive Hybrid Fund | 0.21% | 20.79% p.a. |
Hybrid Mutual Funds Advantages and Disadvantages
The advantage is that it allows investors to invest in low-risk debt instruments and some equities. But the disadvantage is that investments in debt instruments are not suitable for investors who want higher returns like equity funds.
There are three broad classifications of Mutual Funds- Equity, Debt and Hybrid Funds. Typically Equity Funds are good for investors with a high risk appetite, Debt Fund is for the investors who wish to earn higher returns by taking moderate risk and Hybrid Funds are for investors who want the “best of both worlds”.
Higher Returns: Conservative Hybrid Funds are known for their higher returns in comparison to FDs from banks. However, the returns come with some risks involved as stock markets are volatile. Less Risky: The main object of these funds is to ensure the safety of the principal amount with decent returns.
d) It is Known to Perform well in the long term
The hybrid fund investment is appropriate for investors who can commit to holding the units for at least three to five years.
Understanding Hybrid Funds
Hybrid funds invest in both debt and equity instruments. The debt component limits the risk, while the equity component creates wealth. These funds are a good investment when you believe the interest rate will decrease while the equity market increases.
Disadvantages of Investing in Hybrid Mutual Funds
Market Risks - Since the equity market is highly volatile and hybrid funds have exposure in equity, they carry market risks. Any fall in stock prices may also reduce your fund value.
Generally, equity funds are known to inherently carry the highest risk, followed by hybrid funds and, finally, debt funds. There can be variations in risk levels within the category of equity funds, too.
| Mutual Fund | Assets | Fees |
|---|---|---|
| Vanguard Total Stock Market Index Fund (ticker: VTSAX) | $340 billion | 0.04% |
| Vanguard 500 Index Fund Admiral Shares (VFIAX) | $457 billion | 0.04% |
| American Funds Growth Fund of America (AGTHX) | $252 billion | 0.63% |
| Fidelity Select Technology Portfolio (FSPTX) | $13 billion | 0.70% |
Which is the best mutual fund to invest in 2023?
| Top large cap mutual funds | Annual Returns 2023 |
|---|---|
| Nippon India Large Cap Fund | 28.85% |
| Bank of India Bluechip Fund | 27.05% |
| HDFC Top 100 Fund | 26.61% |
| JM Large Cap Fund | 26.16% |
The concept of the "safest investment" can vary depending on individual perspectives and economic contexts, but generally, cash and government bonds, particularly U.S. Treasury securities, are often considered among the safest investment options available. This is because there is minimal risk of loss.
Edelweiss Aggressive Hybrid Fund Direct Growth
Fund Performance: The Edelweiss Aggressive Hybrid Fund has given 21.24% annualized returns in the past three years and 19.22% in the last 5 years. The Edelweiss Aggressive Hybrid Fund comes under the Hybrid category of Edelweiss Mutual Funds.
The performance of conservative funds are strongly linked with interest rates. If interest rates go up, as they have been recently, then the investments of the fund will generally go down in value (which leads to negative returns).
Overall, conservative hybrid mutual funds are a good option for investors who have a low-risk appetite and are looking for a balance of capital preservation and growth potential.
What is Aggressive Hybrid Mutual Fund. Aggressive Hybrid Funds are balanced funds invest primarily in stocks with some allocation to FD-like instruments. Spreading out of investments means these funds are less risky than pure equity funds with almost similar returns in the long run.
Hybrid securities are a way for banks and companies to borrow money from investors. They are complex investments that can be very risky. Get financial advice before investing in hybrids.
Since aggressive funds have a 20-35% exposure to debt securities and money market tools - they are less hazardous than pure equity funds. However, because aggressive funds contain a considerable equity component, they still somewhat have a high risk.
Overall, this strategy creates versatility for organizations who find themselves unable to close the gap between multiple traditional financing outlets. It provides options to combine capital sources received as a single payment or delivered over time, improving the potential for securing capital.
Conservative hybrid/equity savings funds can be used by retirees or medium-term investors who have a high risk appetite. If you are a new investor or are risk-averse, go for balanced advantage funds.
What are the five cons of a mutual fund?
- High fees. Mutual funds have expenses, typically ranging between 0.50% to 1%, which pay for management and other costs to operate the fund. ...
- Market risk. Just as with stocks and bonds, mutual funds generally have market risk, meaning that prices can fluctuate up and down. ...
- Manager risk. ...
- Tax inefficiency.
The only disadvantage of having an aggressive hybrid fund in the core portfolio is that you cannot specify your equity-debt mix. A more conservative investor may, for instance, desire a lower allocation to equity, but by owning mainly aggressive hybrid funds, he will not be able to achieve this.
Taxation of Capital Gains of Hybrid Fund
The rate of taxation of capital gains on hybrid or balanced funds is dependent on the equity exposure of the portfolio. If the equity exposure exceeds 65%, then the fund scheme is taxed like an equity fund, if not then the rules of taxation of debt funds apply.
Hybrid funds, as the name suggests, are funds that invest in a blend of more than one asset class. These could be debt/fixed deposit type of securities, equity, commodities (Gold). Mostly Hybrid funds invest in debt and equity in various proportions. Balanced funds are just one type of Hybrid funds.
Balanced funds are a type of hybrid funds that invest in both equity and debt asset classes in almost equal proportions. All hybrid funds allocate the fund assets to equities and debt securities in a fair ratio but they may be bent towards one asset class by a higher percentage of investments.
