It is vital for investors to possess an understanding of the concept of investing in hybrid funds. Simply put, hybrid funds are mutual fund schemes that invest in multiple asset classes with the goal of diversifying a portfolio and minimizing risks.
By investing in a mix of different assets, hybrid funds aim to offer a balance between growth and income to investors. In many ways, hybrid funds are considered a compromise between debt funds and equity funds, as they provide a mix of both.
These funds generally offer relatively lower risks compared to pure equity funds, but higher risks compared to debt funds. They can be a good option for investors who are seeking to balance risks and returns. Hybrid funds can also be a good option for new investors or those who are hesitant to invest directly in the equity market.
The debt component of hybrid funds provides stability to the portfolio and reduces the impact of market volatility. This allows investors to potentially benefit from equity market returns while also reducing their overall risks.
Hybrid funds come in different varieties based on their asset allocation, with some having a greater allocation towards equities, and others towards fixed-income assets.
It is important for investors to consider their risk tolerance, investment goals, and time horizon when choosing a hybrid fund that is appropriate for them.
An investor with a higher risk tolerance may be more suited to a hybrid fund with a higher allocation to equities, while an investor with a lower risk tolerance may prefer a hybrid fund with a higher allocation to fixed-income assets.
TYPES OF HYBRID FUNDS
Aggressive Hybrid Fund
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