Hybrid Mutual Funds – There are three types of mutual fund investors, One, those who are willing to take a risk and invest in equity funds. Second, are those who are risk-averse and select debt funds, and third is balanced investors, who invest in hybrid mutual funds.
What is Hybrid Mutual Fund?
Hybrid mutual funds are funds that invest in both equity and debt instruments depending on the investment objective of the fund. This means hybrid funds provide diversified exposure to both the equity and debt markets. Hybrid funds reduce concentrated portfolio risk. The hybrid fund has the potential to generate slightly higher returns compared to debt mutual funds. These types of funds are ideal for moderate risk-taking investors.
Benefits of Investing in Hybrid Mutual Funds
- Investing in a hybrid fund offers diversification to the investors, as this fund invests in both equity and debt asset class.
- A hybrid fund allows investors to balance risk and return. The equity portion generates higher returns and debt earns steady returns at lower risk.
- Hybrid funds carry lower risk compared to pure equity funds.
- Hybrid funds are best to hedge against inflation as the equity component offers a higher return and the debt component offers regular income.
How to select Hybrid Mutual funds for investment?
You should consider the following factors while selecting hybrid funds for investment.
Fund performance – Hybrid fund offers moderate returns to the investors. You should check the fund performance for the past three years before investing in hybrid mutual funds.
Risk – You should assess a mutual fund portfolio with respect to risk. Check out where the fund manager is investing your money and in what ratio. Based on the fund portfolio you can determine what type of returns are expected from the fund and risk level.
Expense ratio – Check the expense ratio of the fund. The expense ratio is decided by the fund manager based on expenses incurred for managing funds. Ensure that the expense ratio of the fund is lower.
Fund Type – You need to check out the fund type before investing. There are six types [S1] of hybrid funds available in the market, balanced, aggressive, dynamic, income generation, etc.
Fund Rating – Fund rating is an important thing to check before investing. You should invest in a fund with a fund rating 4 Stars or above.
Investment Objective – Make sure to check the investment objective of the fund. The investment objective of the fund where you are investing money should meet your investment goal.
5 Best Hybrid Mutual Funds to Invest in 2022
#1 ICICI Prudential Equity and Debt Fund Direct
ICICI Prudential Equity and Debt fund direct is the first aggressive hybrid fund for investing in 2022.
Rationale –
- ICICI Prudential Equity and debt fund is the best performing mutual fund. This fund is beating the benchmark index consistently. This fund has given 32% returns (as of March 2022) to investors in the last year.
- The expense ratio of this fund is low (1.2%) which is very good as a fund manager is managing funds with lower expenses.
- The value research rating of this fund is four and this fund invests 65-80% money in equity and the rest in debt.
#2 Quant Absolute Fund – Direct
Quant Absolute Fund direct fund is next in the list of best hybrid mutual funds.
Rationale –
- Quant Absolute Fund is five stars rated fund by Value research. This fund has given magnificent returns in past. In the last 3 years, this fund generated 107% returns to the investors.
- This fund has 78% of equity holding with major investment in blue-chip and large-cap companies.
- The expense ratio of this fund is slightly higher and this fund is suggested for long-term investment.
#3 Kotak Equity Hybrid Fund – Direct
Kotak Equity Hybrid Fund – Direct is one of the best performing hybrid funds and is recommended for investing in 2022.
Rationale –
- Kotak Equity Hybrid fund has generated very good returns for investors in the last three years. This fund is generating good returns with respect to peer funds.
- The Value Research fund rating of this fund is four-star.
- The expense ratio of this fund is the lowest 0.67% (as of March 2022).
- It is an aggressive hybrid fund recommended for investment from a long-term perspective.
#4 SBI Equity Hybrid Fund Growth Direct
SBI equity hybrid fund growth direct fund is the next fund for investment in 2022.
Rationale –
- SBI Equity Hybrid fund has generated very good returns for the investors in past three years. This fund is consistently beating the benchmark index.
- The expense ratio of this fund is very low – 0.85% and it is four stars rated fund by value research.
- Equity exposure of this fund is slightly lower and it is recommended for moderate risk investors.
#5 Canara Robeco Equity Hybrid Fund Growth Direct
Canara Robeco Equity Hybrid Fund Growth Direct is an aggressive hybrid fund for investment in 2022.
Rationale –
- This fund has generated magnificent returns for the investors in past three years.
- Value research has given a five-star rating to this fund.
- The expense ratio of this fund is very low.
- The stock portfolio of this fund contains blue-chip and large-cap stocks of banking, finance, and IT.
Over to You
The hybrid fund has gained very good popularity among investors in the past few years. This fund balances the risk and return and help investors to diversify their portfolio.
If you are moderate risk investors or novice investor you should consider a hybrid fund for investment.
Note – All mutual funds given above are aggressive hybrid funds and fall under the direct category (free from distribution commission).