Hybrid funds: a must in your investment portfolio

Hybrid mutual funds, also known as asset allocation funds, provide the required cushion to your investment portfolio and provide diversification between two or more asset classes. Hybrid funds typically invest in a mix of stocks and debt securities and sometimes in other asset classes such as gold, making them suitable for new investors and risk-averse investors.

These funds help investors diversify their investments across multiple asset classes and can achieve maximum returns at relatively less risk.

Hybrid funds have emerged as a preferred investment option with a lot of traction from investors in the first three months of the year, almost double that of the previous quarter.

“Hybrid funds are a broad basket of products – starting with arbitrage funds, equity savings funds, balanced advantage funds, aggressive hybrid funds and conservative hybrid funds. We’ve seen monthly feeds in each of these categories and that’s because of how investors view market behavior. The equity market has returned almost 100% since its lows in March of last year, ”said Vaibhav Shah, Head of Products and Marketing, Mirae Asset Investment Managers India Pvt. Ltd.

“It has been a phenomenal rally in the stock markets. In this kind of market situation, investors are wary of how to start their investments in stocks. What’s the right mix of stocks and debt? This is where hybrid funds are the right category where you get the right mix of stocks and debt, depending on your risk profile. This is one of the reasons why investors are turning to this (hybrid) category, ”Shah adds.

Hybrid funds provide exposure to multiple asset classes and allow investors to divide risks for more stable returns.

“Today, hybrids are the biggest trend. Whether it’s hybrid cars or hybrid education. Hybrid funds are distinguished by the fact that they do not provide full equity exposure for investors. For anyone new to investing, Hybrid can provide a variety of funds within the category. Since they don’t go for 100% stocks, they can still invest in mutual funds without looking (synchronizing) the markets, ”said Ameya Godse, vice president of Naik Wealth Pvt. Ltd.

In addition to accessing multiple asset classes with a single fund, hybrid funds offer benefits such as diversification, risk mitigation and portfolio management. If you are looking for a balanced portfolio, hybrid funds may be the smartest way to allocate assets.

“Asset allocation is one of the most important things investors should remember. Almost 92% of your returns come from the right asset allocation. Time the market or pick the right stocks maybe only 2-4% each. Much of the work can be done by creating the right mix (of investments). Hybrid funds offer multiple asset allocation in a single product, ”Shah shares.

Experts discussed different types of hybrid funds and their benefits for investors during a webinar titled “Hybrid Funds: A Smart Method for Asset Allocation”, hosted by Economictimes.com in association with Mirae Asset Mutual Funds.

The exclusive session explained how investors can choose the right fund and what factors to watch out for. The expert panel also deliberated on common misconceptions regarding hybrid funds. Click here to watch the full session.

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