What is Hybrid Funds?
A hybrid fund is a type of mutual fund that invests in debt, equity, and other asset classes. Such funds ensure capital protection to some extent and bring modest returns.
Should you invest in debt or equity?
You know that equity exposure brings higher returns but also carries a greater risk of loss. Meanwhile, debt funds protect your investment, but they limit your returns potential. This puts you in a dilemma?????????….
This makes hybrid funds outstanding for a stand-alone option, good funds for beginners or core holdings in a complete portfolio of mutual funds.
Hybrid funds are the answer as they invest in both equity and debt instruments. As a result, they are less risky than equity funds, but more so than debt funds.
The mixed exposure has an impact on the returns they bring as well. As an investor in hybrid funds, you are likely to get higher returns than with debt funds. But, the returns may be lower than with equity funds.
Benefits of Hybrid Funds
- The fund manager can switch between different types of assets to take advantage of the market
- There is a diversity in the portfolio, which provides growth from stocks and safety from bonds
- Hybrid funds are professionally managed
- Investors can also receive income in the form of dividends
- It is suitable for first-time investors
- They come with low volatility and are tax-efficient
