Here’s How Hybrid Funds Give Your Investment Flexibility


Many investors are under the presumption that the only mutual funds which one can invest is in equity mutual funds. This is not true. Mutual Funds are full of professionally managed funds that invest across various securities and money market instruments and maintain per diversify portfolio. Depending on the nature of the scheme and its investment objective, a mutual fund may invest across various asset classes like equity and debt. SEBI (Securities and Exchange Board of India) has further categorized mutual funds based on their certain unique attributes including risk profile, asset allocation strategy, investment objective etc.

What are hybrid funds?

Some of the major mutual fund categories include equity, debt, solution oriented, balanced, ETF, index, gold, banking and PSU etc. While equity mutual funds predominantly invest in equity and equity related instruments whereas debt funds invest in fixed income securities, hybrid funds are those mutual funds to invest in both stocks as well as debt related instruments. In which asset class a hybrid fund may invest will totally depend upon the nature of the scheme and investment objective. For example, an aggressive hybrid fund may invest anywhere between 65 to 80% of its total assets to equity while the remaining in debt and other mahi money market instruments. On the other hand, a conservative hybrid fund may invest up to to 80% in debt related instruments while the remaining is allocated to equities.

Add flexibility to your mutual fund portfolio through hybrid funds

Another good thing about investment in hybrid funds is that they do not come with the freedom predetermined lock in period like some other equity funds like ELSS. Since hybrid funds do not have any such lock-in period investors are free to invest or withdraw their habit fund units depending on their income needs. If you are investing in hybrid funds there is no need to time the market. One can invest in hybrid funds on any working day and depending on the investment amount, units will be allotted to their portfolio. If you have invested in a tax saving scheme like ELSS you will not have that much liquid in your portfolio. Since ELSS comes with a three-year lock in period investors cannot redeem or withdraw their units for a minimum of 36 months. In such a scenario, in case of a financial agency, investors can redeem their hybrid fund units depending on their financial needs. One does not need to withdraw the entire investment amount. Once you withdraw the required amount, the remaining amount counts to remain invested in the hybrid fund.

Hybrid funds have multiple investment option

The flexibility doesn’t remain restricted to withdrawal, investors have multiple investment options to choose from. You can either make a lump sum investment in hybrid funds or start a SIP. One does a lump sum investment right at the beginning of the investment cycle. Investors are allotted units in quantum with the investment amount and depending on the fund’s existing NAV (net asset value). Another way to invest in hybrid funds is by opting for a SIP. A systematic investment plan is an easy and hassle-free way to invest in hybrid funds. SIPs are flexible in nature. They give investors an opportunity to invest small amounts at regular intervals. Investors even have the option of skipping SIP in case they do not have the desired investment amount. With SIP every month on a fixed date a predetermined amount is debited from your savings account and electronically transferred to the hybrid fund. Investors benefit from compounding and rupee cost averaging if they remain invested in hybrid funds for the long run.

If you want to invest in hybrid fund to achieve your life’s long-term goals, make sure to invest depending on your appetite for risk.

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