The number of stock market investors in India has increased rapidly in recent years. While beating inflation, the stock market proves to be a better way to get better investment than other means. However, those investing in the market are instructed to keep a few things in mind. The stock market is attractive only for those investors who want to take risk, but it becomes necessary to reduce the risk. For this reason, the first instruction is given to those who invest in the market – to make the portfolio diverse.
Why mutual funds are beneficial?
At the same time, the second major instruction is that before investing, research should be done by yourself. Investors, who do not have much knowledge or experience about the stock market, turn to mutual funds. This is because each fund is managed by a team of professionals. In such a situation, the common investor is able to take advantage of the boom of the market even after not being able to test the market.
Where are hybrid mutual funds useful?
If you also want to take advantage of the market boom and at the same time want to keep the risk low, then hybrid mutual funds prove to be useful. Before proceeding further, let us first tell you what exactly is Hybrid Mutual Fund? Hybrid mutual funds are a mix of different asset classes. They generally invest in equity or debt. Many hybrid mutual funds also include gold and international equities in their portfolio.
Who is Hybrid Mutual Fund for?
In this way, Hybrid Mutual Fund gives you the benefit of multiple asset classes by investing in one place. Not only can you enjoy the benefits of investing in equity and debt, but with the help of hybrid mutual funds, you also get the benefit of investing in gold and shares of foreign companies. Hybrid mutual funds prove to be better for those investors who want to invest through small amounts like thousand-two thousand and who have short-term targets like 3-5 years.
What do industry experts say?
Executive Director and Chief Investment Officer, ICICI Prudential Mutual Fund S. Naren points out that from Warren Buffett to Howard Marks, all veteran investors say it is necessary to invest in undervalued asset classes to make money. Hybrid fund proves effective even on this condition. Hybrid funds reduce the risk through a diversified portfolio and ensure good returns. Due to this, the risk of investment sinking with the investors is less.
According to Naren, there are mainly five types of hybrid funds:
Conservative Hybrid Funds: Such funds invest 10-15% of the portfolio in equity and the remaining 75-90% in debt. The risk is less in these, but the returns are also less. Its average returns are 9.74% in one year, 8.72% in three years and 7.16% in 5 years.
Aggressive Hybrid Funds: These funds invest a minimum of 65 per cent and a maximum of 80 per cent in equities, while the remaining 20-35 per cent is invested in bonds and other fixed income debentures. This is for investors who can take more risk. Its benchmark gave 4.8 per cent in 2022 and ICICI Prudential gave 11.7 per cent.
Balanced Advantage Hybrid Funds: This fund can invest its entire portfolio in equity or debt. ICICI Prudential Balanced Advantage Fund increased its investment in equity to 73.7 per cent in March 2020 when the market fell after Corona. On the other hand, when the market crossed 60,000, the fund reduced it by 30 percent. Its one year return is 15.59 percent and three year return is 13.79 percent.
| Fund Name | 1 Year Return |
| Sundaram Balanced Advantage Fund | 15.06% |
| Bandhan Balanced Advantage Fund | 14.65% |
| Axis Balanced Advantage Fund | 14.27% |
| Nippon India Balanced Advantage Fund | 14.07% |
| ICICI Prudential Balanced Advantage Fund | 13.54% |
| HSBC Balanced Advantage Fund | 13.21% |
| Union Balanced Advantage Fund | 13.09% |
| ITI Balanced Advantage Fund | 12.77% |
| Shriram Balanced Advantage Fund | 12.68% |
| DSP Dynamic Asset Allocation Fund | 12.41% |
Multi-Asset Allocation Hybrid Funds: This is called Evergreen Fund. In this category, ICICI Prudential gave a return of 16.8 per cent in 2022 and the benchmark gave 5.8 per cent. At the same time, the return of this category is 17.74 percent in one year, 17.93 percent in three years and 10.22 percent in five years.
Equity Saving Hybrid Funds: These funds invest up to 65 per cent in equity and up to 10 per cent in debt. Its average returns have been 11.32 per cent in one year, 11.06 per cent in three years and 7.51 per cent in five years.
This is why the future is bright
Naren says that India’s growth story looks fantastic in the long run. The corporate world is in good shape. India’s banking system remains strong. The valuation of Indian market is better than other markets of the world. In the coming times, there may be challenges due to monetary policies and geopolitical reasons, but there is no doubt that the Indian economy will grow rapidly in the next decade as well. For this reason, the future of hybrid funds is also bright.
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