Best Hybrid Mutual Funds to Invest in India 2024

Introduction to Hybrid Mutual Funds

Mutual fund investment can be a difficult task due to several options available in the market. Each investor can have their own risk tolerance, which is just like the different sizes of fingers in a hand. So, for those who want some safety as well as returns on their investment at the same time, hybrid mutual funds are the best option.

Hybrid funds invest in both equity and debt securities to achieve growth while keeping safety levels intact. In this blog post, we will discuss how hybrid funds work, what types are there, and why they might be a great choice for investment in 2024.

 

Understanding Hybrid Funds

The main purpose of hybrid funds is to maintain equilibrium between growth and risk. The allocation between equity and debt may vary thus providing different levels of risk and return. Let us look at various forms of hybrid funds according to their equity vs debt allocation:

• Equity-Oriented Hybrid Funds

• Debt-Oriented Hybrid Funds

• Balanced Hybrid Funds

• Arbitrage Hybrid Funds

• Monthly Income Plans

 

 

Equity-Oriented Hybrid Funds

Equity-oriented hybrid funds, also called aggressive hybrid funds, invest about 65% of their assets into equities and related securities while the remaining 35% goes into debt instruments.

These are suitable for investors looking for higher returns by taking some risks. For example, ICICI Prudential Equity & Debt Fund has shown consistent good performance over the years.

 

Debt-Oriented Hybrid Funds 

Debt-oriented hybrids are conservative where around 60% of investments are done in bonds or other fixed-income products issued by governments etc., and the remaining 40% is invested into stocks known as equities.

Such type of investments suits people who do not want too much fluctuation but rather stable returns most times such as SBI Conservative Hybrid Fund among others.

Balanced Hybrid Funds

Balanced hybrid funds maintain a 40-60% allocation in both equity and debt, adjusting based on market conditions. The fund manager plays a crucial role in deciding the allocation to optimize returns.

For instance, 361 Balanced Hybrid Fund provides a balanced approach to investment by allocating assets equally between stocks and bonds, etc., thereby reducing overall risk exposure while still generating reasonable levels of income from dividends or interest earned.

Arbitrage Hybrid Funds

Arbitrage hybrid funds work on exploiting price differences across various markets; they buy lower-priced stocks from one market and sell them higher priced in another.

These rely heavily on the expertise of fund managers who can identify such opportunities because there are many risks involved like liquidity issues among others hence the need for careful consideration before investing in these types of funds. A good example is the Nippon India Arbitrage Fund which has been successful over time.

Plans for Monthly Income

Monthly income plans invest mainly in fixed-income securities that offer regular income. Some equity is also included to improve returns.

A good example here is ICICI Prudential MIP 25 which gives both safety and growth.

 

Comparing Hybrid Funds for Better Returns

To achieve better returns, it is necessary to know how hybrid funds operate. The performance of the fund is determined by the allocation between equity and debt. Let us look at a few top-performing hybrid funds based on the last 10 years' performance.

 

• Quant Absolute Fund

• ICICI Prudential Equity & Debt Fund 

 

These funds have given more than 18% CAGR returns in last 10 years which has been higher than Nifty 50 index as well as large-cap funds.

 

Case Study: ICICI Prudential Equity & Debt Fund

ICICI Prudential Equity & Debt Fund is a well-managed hybrid fund that can be considered as an excellent example for this category. It invests around 70% of its money into equity with approximately 55% being invested in large cap stocks thus ensuring safety plus growth.

Such kind of strategic allocation has resulted into good gains therefore many people prefer it among others.

 

Comparison with Quant Absolute Fund

Another fund called Quant Absolute allocates 80% in equity with only 35% being invested in large cap stocks; hence taking more risk but getting higher returns too thus proving the aggressive nature of some hybrid funds can pay off greatly.

Investors need to evaluate their risk appetite when choosing between these two options.

 

Role of Expertise by Fund Manager

The success or failure of any given hybrid mutual fund largely depends on skills possessed by its manager(s). A competent one should be able to optimize allocation between equity and debt based on prevailing market conditions so as maximize gains from investments made.

Track record should also be among factors considered by investors before settling down on specific manager running a particular hybrid scheme.

 

Conclusion

Hybrid mutual funds provide balanced way of investing by mixing growth potential offered through equities with stability provided by debts. They are designed for all types of investors, ranging from those who are risk averse to others who may be more aggressive in nature.

By understanding the different types of hybrid funds and evaluating their performance, investors can make informed decisions to achieve their financial goals in 2024 and beyond.

Share this blog with others to spread awareness about the benefits of hybrid mutual funds. Happy investing!

Disclaimer: This Stock Analysis is only for informational purposes and should not be considered as investment advice. Always do your research and consult with a financial advisor.