Hybrid Funds Invest: Hybrid funds will provide excellent returns and tax exemption. Know this scheme of mutual fund.
Amid the record rise in the stock market, investors are now eyeing such mutual fund schemes, which, along with giving good returns, also keep the risks low. For this reason, hybrid mutual funds are becoming increasingly popular among investors. These funds not only balance returns by investing across multiple asset classes but also provide tax benefits.
What are hybrid mutual funds?
A hybrid fund is such a scheme of mutual fund that does not limit the investors' money only to the stock market. Together in these—
equity (shares)
debt (bond)
gold
Other assets like REITs
Is invested in.
For this reason they are also called asset allocation funds.
Why are investors liking hybrid funds?
In today's time, many investors do not want to invest their entire amount only in equity. Hybrid funds provide a solution to this problem because:
Risk is distributed among different assets.
Losses are limited when the market falls.
The fund manager rebalances the portfolio periodically.
You can also get tax relief.
Major Categories of Hybrid Funds
Equity Savings Fund
In these funds, usually 10–25% of the money is invested in equity, while the remaining amount is in debt and arbitrage strategies.
These are suitable for investors with low or medium risk appetite.
Balanced Hybrid Fund
These funds invest 40–60% in equity and 40–60% in debt.
These are perfect for investors who want a balance between returns and stability.
Aggressive Hybrid Fund
In these schemes, 65–80% of the money is invested in equity and the rest in debt.
These are considered better options for investors taking more risks.
Dynamic Asset Allocation/Balanced Advantage Fund
In these funds, investment in equity can be made from 30% to 100%, depending on the market conditions.
These are quite popular among investors with moderate risk appetites.
Multi-Asset Allocation Fund
In these funds, at least 10% is invested in assets like equity, debt, and gold.
This provides better diversification in the portfolio.
Big tax benefit in hybrid funds
The returns on investing in debt funds or FDs are taxed as per your income tax slab, which can be up to 30%.
But in hybrid funds—
If there is more than 65% investment in equity and arbitrage and the investment is held for more than 1 year, then it is considered an equity fund.
In such a situation, long-term capital gains tax is only 12.5%, which is a big advantage for investors.
How do hybrid funds handle asset allocation?
Hybrid funds invest based on a predetermined asset allocation and rebalance it from time to time.
For example—
If the share of equity in an aggressive hybrid fund increases beyond the prescribed limit, then the fund manager sells equity and invests in debt.
Due to this, the investor does not need to do anything himself.
Who should invest in hybrid funds?
new investors
moderate risk takers
Those seeking returns along with tax savings
Investors who do not want to manage their portfolio themselves
Conclusion
Hybrid funds are a great option for investors who
want to reduce risk and get tax relief along with excellent returns.
In the changing market environment, this mutual fund scheme makes investment more balanced and safe.
