Curated list of hybrid funds for investors seeking best of both equity & fixed income. Also known as balanced funds which are designed to accommodate the interests of those investors who are looking for a debt plus returns with higher levels of risk as compared to preferring fixed income funds.
Do you wish to have a combination of both income and moderate growth? In that case, investing in hybrid funds would the best option. As hybrid funds are meant for investing in a combination of both equity and fixed income creates an opportunity for an investor to benefit from best of both worlds i.e. both income and capital appreciation while avoiding excessive risk. Overall these funds are meant to diversify a little of your equity risk by exposing to debt in order to maintain fair returns.
Such diversified holdings are capable of managing downturns in the stock market without too much of a loss compared to an all-equity fund. But on the other hand, these balanced funds or hybrid funds provide lower returns as compared to all equity fund during a bull market.
Hybrid mutual funds (equity-oriented) usually allocate 60-70% of their assets in stocks and the balance in fixed income securities. An allocation of 65% or more towards equity gives the right to unitholders to avail concessional tax treatment in terms of dividend and capital gains.
Typically, hybrid funds invest in debt instruments with an average maturity of more than five years which gain more from an interest rate cut. As a result, the returns of the hybrid fund derives from the performance of both the equity and debt portions.
Investors looking to earn higher tax efficient returns than debt returns should prefer hybrid funds as an ideal investment option assuming lower than full equity risk. In such a manner, investors can exercise their right to have regular dividends which can also fulfill their regular cash flow requirements in a tax-efficient manner.