Hybrid Category of Mutual Funds

What is Hybrid Fund?
Hybrid Fund is a mutual fund scheme that invests in a mix of equity and debt which can vary proportionally over time or remain fixed with the objective of conserving the principal, providing regular income, and achieving long-term growth.

Why Hybrid Fund in Current Market Scenario
Equity Side
• Hybrid funds invest 30-40% in equities.
• These funds invest in equities of those companies which have strong and sustainable growth potential.
• Equity provides capital appreciation and long term wealth creation.
• Equity exposure provides long term growth.
• In the current low interest rate regime, equity becomes an attractive investment avenue.
• These factors indicate the high returns potentials of Equity investments.
Debt Side
• These funds invest 30-40% in debt.
• Hybrid Funds invest in high credit quality debt instruments.
• They invest in corporate bonds, gilt and money market instruments.
• Debt provides capital protection and stable returns.
• Debt instruments carry low risk compared to stocks, thereby balancing the risk of the fund.
• These Factors show that the debt markets have the potential to provide stable returns.
Gold
• Exposure of these funds towards gold is 20-30%.
• Gold is purchased for jewellary and industrial uses.
• It is an investment as well as a substitute for currency.
• Gold demand has sustained due to risk averse investors and low interest rate.
• Gold acts as the best hedge at the time of bearish equity market due to negative correlation with stocks
• It is the best hedge during financial instability.
Hybrid Funds should form a vital part of Investor's MF Portfolio
• They have performed not only in short term, but also in long term despite the global turmoil in Equities Markets.
• The debt portion takes care of short term volatility as well provides stable returns to the portfolio.
• These funds seek the best of equity, debt and gold by investing in equities, fixed income instruments and gold.
• It includes the power of equities, stability of debt market instruments and hedging against market volatility via gold.
• Ideal for all sorts of investors as part of asset allocation.
• It's a power investment tool because of its inherent design, which allows maintaining an effective balance between debt, equity and gold.
• The best and worst performer changes year by year, but 2 out of 3 are positive in most of the years.
• Even 52% fall in stocks in 2008 was balanced by gains in bonds and gold.