Hybrid funds are a category of mutual funds that invest in equities and debt. Following SEBI’s recategorization of mutual funds, there are seven categories of hybrid funds that investors can invest in. Read on to know the advantages of investing in these funds:

  1. Best of Both Worlds
  2. Investing in hybrid funds give you the best of both worlds – equities and debt. The equity and debt proportion of some of the popular types of hybrid funds are as follows:
    Type of Hybrid Fund Equity Proportion (in percent) Debt Proportion (in percent)
    Aggressive Hybrid 60-80 40-20
    Balanced Hybrid 40-60 60-40
    Conservative Hybrid 10-25 90-75
    Equity Savings Yes 10

    Apart from the above, there are dynamic asset allocation hybrid funds which dynamically manages between equities and debt.
    While the equity portion generates inflation-indexed returns, the debt component gives stability in case of market volatility.

  3. Ideal Bet for Addressing Mid-Term Goals
  4. Hybrid funds are an ideal bet for addressing mid-term goals such as accumulating a corpus for making a down payment for buying a car or house. They are also ideal financial instruments for accumulating wealth for the higher education of your child.

    Since hybrid funds invest in a mix of equities and debt, they are ideal for investing for the above-mentioned goals.

  5. Professional Management of Asset Allocation
  6. When the markets are high, it’s important to reduce equity exposure and vice versa. However, it needs to be done with care as a wrong move can have long-term repercussions. With hybrid funds, this allocation is taken care of by a professional fund manager.

    So, when the market is high, the fund manager sells the equity portion and when low, equities are purchased to maintain the minimum levels. This professional management not only gives stability to the overall portfolio, but ensures you sail through market cycles with ease.

  7. Get a Taste of Equities
  8. Among several asset classes, it’s equities that have the potential to generate inflation-indexed returns in the long run. However, equities are volatile, which make them a risky bet in the short term. At the same time, it’s a fact that to accumulate wealth for long-term goals such as retirement, your portfolio must have sizeable equity exposure.

For retail investors, who are wary about investing solely into equities, hybrid funds are a better alternative. Since these funds don’t invest only in equities, they are ideal to get hands-on experience with equities.

It’s important to note that taxation of hybrid funds is as per the asset allocation. Funds with higher exposure to equities get taxed as equity funds, while those where the debt component is higher gets taxed like debt funds.

Explore Various Mutual Funds here.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product.  Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

Trending Articles

Article Links

Equity Linked Savings Scheme (ELSS)

Types of Mutual Fund

What is Debt Fund

What is Mutual Fund

What is an Index Fund

Latest Articles


When Should You Withdraw Money from a Mutual Fund?

Read More
Posted on 11 February 2020

Why should you start SIP for your small business?

Read More
Posted on 11 February 2020

Avoid These Mistakes While Investing in Mutual Funds

Read More
Posted on 06 February 2020