What is Hybrid Mutual Fund?

Hybrid Mutual Fund is a combination of more than one type of fund. While they invest in shares of companies listed on the exchange, like equity funds.

- Kalpesh Dave

Likewise, debt funds, they also invest in fixed-income instruments like bonds, debentures, treasury bills, etc. Hybrid funds provide a mix of three major asset classes – equity, fixed income market and commodities market. With this, they provide dual benefits in the form of:

Capital appreciation from the equity portion.  

Stable growth from the debt and gold allocation. 

Hybrid mutual funds are actively managed openended funds. This means you can invest and withdraw from them throughout the year. There is no lock-in period. 

The main goal of the fund manager is to benefit from price appreciation in all three asset classes while balancing the risk. 

Hybrid Mutual Funds are safer than pure equity funds but are riskier than debt funds. Hence, they’re apt for moderately aggressive investors. This is also an excellent first step for beginners who want to test the waters before going all in. 

Where Does Hybrid Mutual Fund Invest? 

The fund manager of a Hybrid Mutual Fund collects the corpus from investors and then divides it among equity, debt, and commodities. A hybrid mutual fund invests in the following: 

• Equity shares of large-cap, mid-cap and small-cap companies. 

• Debt instruments like corporate bonds, sovereign papers, commercial papers, zero coupon bonds, certificates of deposits, etc. 

• Commodities like gold, silver, crude oil, etc. 

How Does a Hybrid Mutual Fund Work? 

There are three major principles of Hybrid Mutual Funds: