Hybrid Mutual Funds: Does hybrid fund give better returns at lower risk? Understand the complete math here

Hybrid Mutual Funds: In the world of investments, hybrid mutual funds have become an important option, especially for investors seeking balanced returns and controlled risk. These funds are a mix of equity and debt instruments, allowing investors to benefit from both asset classes.

How Do Hybrid Mutual Funds Work?

Hybrid mutual funds are primarily of two types:

1. Aggressive Hybrid Funds: These funds allocate 65-80% of investments to equities, with the remaining portion in debt instruments. They are suitable for investors who are willing to take moderate risks for potentially higher returns.

2. Balanced Hybrid Funds: These funds maintain a more balanced ratio of equity and debt, reducing risk and ensuring stable returns. They are ideal for investors who prefer moderate risk exposure.

Hybrid funds are perfect for investors looking to hedge against market fluctuations while still benefiting from equities. During a bullish market, the equity portion delivers good returns, whereas in downturns, the debt instruments act as a safety cushion.

SIP and Top-Up Strategy

The best way to invest in hybrid mutual funds is through a Systematic Investment Plan (SIP). Investing via SIP helps mitigate market volatility. Additionally, a yearly SIP top-up of 8-10% can significantly grow the investment over the long term.

Top Hybrid Mutual Funds

Several excellent funds fall under this category, including:

• ICICI Prudential Equity & Debt Fund
• HDFC Hybrid Equity Fund
• SBI Equity Hybrid Fund - Direct Plan Growth

For example, if an investor contributes ₹10,000 per month to such a fund, their investment could potentially grow to ₹3 crore in 25 years (based on estimated returns).

Conclusion