As an investor, you might be looking for funds that offer you a balanced approach. The aim is to gain high returns while managing risks. This is where hybrid funds can be an option. These funds invest in debt as well as equity. But the mix is based on the nature of the fund.
So, what is the asset class mix of these funds in general? Well, let us find out here.
What are Hybrid Funds?
Hybrid funds are a type of mutual funds that invest in a mix of assets like equity, debt, and other commodities. The mix is based on their aim and nature. Some of these invest more in equity for higher returns, while others invest more in debt for stability.
Since all these have a different approach to their investment, these are suitable for most investors. You can select the fund based on the investment goal and ensure a better return.
Components of a Hybrid Fund’s Asset Mix
Hybrid funds invest in a mix of assets. This is to balance growth and stability. The generic assets that are used in this mix are as follows:
1. Equity (Stocks)
It invests in stocks of various companies, ranging from small cap to large cap across sectors. These stocks help you with growth and competitive returns. As companies grow over time, their profitability also increases. It offers an option for capital appreciation as well.
2. Debt (Bonds and Fixed-Income Securities)
To offer stability, hybrid funds invest in debt. These include options like government bonds, corporate bonds, and money market securities. This helps to reduce the overall risk while offering a stable income as well.
3. Gold and Commodities
This is usually linked to multi-asset funds. These funds invest in gold ETFs or other commodities. Gold acts as a hedge against inflation and brings diversification during market ups and downs.
4. Real Estate (REITs)
There are a few funds that invest in high-growth and secure real estate investment trusts (REITs) or real estate-related securities. This gives you exposure to the property market without directly buying physical assets, adding another layer of diversification.
5. Derivatives and Arbitrage
Certain funds use derivatives for hedging risks or arbitrage strategies. Arbitrage funds invest in both cash and futures markets to earn small profits from market price differences while keeping risks low.
Types of Hybrid Funds
Based on asset mix, here are the types of hybrid funds:
- Conservative Hybrid Funds:It invests mainly in debt for stability, with some portion in equity for growth.
- Balanced Hybrid Funds:This fund focuses on somewhat equal investment in debt and equity.
- Multi-Asset Allocation Funds:To offer the best results, these use a mix of debt, equity, and other assets like gold ETFs or RIETs.
- Aggressive Hybrid Funds:These target growth and so invest mostly in equity. But for stability, a part is invested in debt.
- Arbitrage Funds:It combines equity, debt, and derivatives to generate returns with lower risk through hedging and arbitrage strategies.
Here is a table for quick viewing.
| Fund Type | Equity (%) | Debt (%) | Other Assets (Gold, REITs, etc.) (%) |
| Conservative Hybrid Fund | 10–25 | 75–90 | Minimal or none |
| Balanced Hybrid Fund | 40–60 | 40–60 | Minimal or none |
| Aggressive Hybrid Fund | 65–80 | 20–35 | Minimal or none |
| Multi-Asset Allocation Fund | ≥10 (each) | ≥10 (each) | At least three asset classes |
| Arbitrage/Equity Savings Fund | 65–100 (equity + arbitrage) | 0–35 | Derivatives used for hedging/arbitrage |
Conclusion
Hybrid funds combine equity, debt, and sometimes other assets like gold or real estate to give you balanced growth and stability. Each type of hybrid fund has a different mix based on its strategy and risk level.
By understanding what goes into a hybrid fund, you can choose one that matches your financial goals and comfort with risk. This is suitable if you are looking for growth with reduced management.
