We will unpack hybrid mutual funds. How they let you invest across multiple assets effortlessly.

The News

AMFI released data showing that net inflows in hybrid mutual funds have increased by over 240%, from ₹4901 crores in September to ₹16,863 crores in October.

💡 Hybrid Funds
As the name suggests, hybrid mutual funds combine multiple assets in a single portfolio. They aim to balance growth and stability during different phases of the economic cycle by diversifying across asset classes.

Hybrid funds could be an interesting investment option for people considering exposure to multiple assets without the hassle of investing in each asset class separately.

Though there are seven types of hybrid funds, today, we’ll focus on three that primarily offer exposure to two key asset classes that serve as the foundation of most investment portfolios: equity and debt. Here’s how.

Hybrid Fund Ft. Equity and Debt

Equity and debt often have a low or negative correlation, meaning they typically respond differently to market conditions.

During growth, equities shine as businesses thrive, while debt offers stable but modest returns. In slowdowns, debt provides safety and steady returns as equities struggle.

This complementary behavior makes them ideal for diversification, ensuring that when one asset class underperforms, the other can help offset losses, reducing overall portfolio risk.

Now, let’s dive into the three types of hybrid funds.

1. Aggressive Hybrid Funds
It allocates 65 to 80% investment in equity and 20 to 35% in debt instruments. Ideal for investors with a higher risk appetite who also seek some level of stability.

2. Balanced Hybrid Funds
It allocated 40 to 60% investment in each equity and debt. Designed for moderate-risk investors looking for steady returns, with a balance of growth and stability.

3. Conservative Hybrid Funds
It allocated only 10 to 25% in equity and 75 to 90% in debt instruments. Suitable for conservative investors seeking capital preservation with limited growth, prioritizing safety.

The key advantage of hybrid funds is automatic rebalancing by the fund manager based on market conditions, saving investors taxes, and the effort of managing allocations themselves.

Hybrid funds offer goal-oriented solutions. Fund houses even name these plans to reflect their purpose—like SBI Magnum Children’s Benefit Savings Plan (a conservative hybrid plan) or Tata Retirement Savings Fund (an aggressive hybrid) for retirement planning.

To Conclude

Hybrid funds are not just a financial product—it could be a strategic investment. For younger investors, aggressive hybrid funds can drive growth. For retirees, conservative hybrids offer stability and income.

Apart from the three hybrid funds, we have also explored two other types of hybrid funds–multi-asset funds and arbitrage funds. These funds also cater to the unique needs of investors.