Hybrid mutual funds: Why should you opt for the blend of equity and debt?

livemint.com:

PPFAS (Parag Parikh Financial Advisory Services) rolled out a balanced advantage fund, Quantum and Mahindra Manulife have also launched their multi asset allocation fund schemes lately. Hybrid mutual fund is a broad category that entails seven types of mutual fund categories. The latest AMFI (Association of Mutual Funds in India) data shows there are a total of 149 hybrid mutual fund schemes.

Out of these, the most popular ones are dynamic asset allocation (31), arbitrage funds (27) and combined category of balanced & aggressive hybrid funds (31), shows the AMFI data as on Jan 31, 2024. As the name suggests, hybrid mutual funds have allocation to equity and debt. The ratio, however, varies from category to category.

For instance, in conservative hybrid funds, allocation to debt instruments fluctuates between 75 to 90 percent in debt instruments while the remaining to equity. ALSO READ: Flexi-cap vs large-cap: Which mutual fund is better and why? Balanced hybrid funds, at the same time, have 40 to 60 percent allocation to equity and remaining to debt. In case of aggressive funds, 65 to 80 percent allocation is made to equity while the remaining to debt instruments.

Dynamic asset allocation or balanced advantage funds are flexible in terms of allocation to equity (0 to 100 percent) and debt (0 to 100 percent). Multi asset allocation funds are mandated to invest in at least 3 asset classes with a minimum allocation of at least 10 percent in each class. Arbitrage schemes follow an arbitrage strategy with minimum 65 percent investment in equity and equity related instruments.