Decoding Hybrid Mutual Funds: What are they and who should invest?
Mutual funds are considered awesome financial instruments to invest our wealth and make it grow. Money invested in mutual funds is managed by expert managers, taking away the hassle of doing it ourselves. But let’s admit it, choosing the right kind of fund can be confusing for many investors, right?
Today, we’ll dig into the world of hybrid mutual funds. So, what exactly are they all about?
Hybrid Funds are mutual fund schemes that aim to minimise risk and diversify the portfolio by investing in a mix of debt, equity, gold and other asset classes. They have more potential to generate better wealth than debt funds, also less risky than equity funds. The risk and return of the fund depend on the allocation to equity securities in the portfolio. Remember, higher allocation to equity means higher risk.
When considering hybrid funds, there are various types categorized by asset allocation. It is important for investors to select a hybrid fund based on risk tolerance, investment timeframe, and financial goals. The following are some types of hybrid funds:
Aggressive Hybrid Fund: These funds fall in the group of open-ended schemes that primarily invest in stocks and equity-related products. They also allocate a part of their assets towards debt and money market instruments. These funds involve higher risks due to their emphasis on aggressive stock investments.
Conservative Hybrid Fund: These funds are open-ended schemes that invest largely in debt instruments, often allocating 75% to 90% of their assets to fixed-income securities. The remaining is allocated to stocks and equity products. These funds are more stable than aggressive hybrid funds, making them suitable for low-risk investors.
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