Hybrid mutual funds are great for investment returns; here's how it works

When it comes to investment, you can put your funds in three different types of tools based on your risk appetite and tolerance. The first one is a high risk, which is equity investment, the second is debt investment, which is low risk, and the third and most favoured one is hybrid schemes. Experts advise that all investors should have a mix of all schemes to meet their financial goals. Hybrid mutual funds offer a mix of high-risk and debt schemes that help the investor to balance the risk-reward ratio, ultimately optimising the return on investment. 

What are hybrid mutual funds? 

Hybrid funds are schemes where the money is invested in two or more asset classes. So, it can be equity, debt, bonds, or others depending on the scheme. They are also called asset allocation funds. The biggest draw of such funds is that investors get exposure to multiple asset classes through a single fund.  

Another big advantage of putting your money in hybrid mutual funds is that the money invested gets exposed to various levels of risks, ranging from conservative to moderate and aggressive, securing your investment.  

The hybrid funds can be further classified into balanced funds, target date funds, and blend funds. Under balanced funds, the investment or proportion of asset allocation is to the order of 60:40. The target date funds, which are also called lifecycle funds, focus on multiple asset classes for diversification. It starts with aggressive investment and then gradually balances out the portfolio with conservative funds.  

Lastly, the blended fund focuses on both value and growth stocks.  

Taxation 

Experts say hybrid funds have a better chance of generating decent returns than debt funds and are more stable than equity funds. When it comes to taxation, the rates are calculated in accordance with the Income Tax Act for Capital Gains. 

The taxation for equity funds depends on the tenure of the scheme. For long-term capital gains of more than Rs 1 lakh, 10 per cent tax on the amount, whereas short-term capital gains are taxed at 15 per cent.   

Debt schemes are taxed as pure debts. Besides, the capital gains are added to your funds and taxed as the income tax norms depending on the slabs. Long-term capital gains are taxed at 20 per cent after indexation, and 10 per cent without indexation.  

Top hybrid mutual funds in India 

Hybrid mutual funds are a good pick for those who are new to investing and want a clear-cut profit on their invested funds. The flexible investment plan makes these funds popular even with experienced investors. Those planning to invest can look at these plans and draw their investment plan. 

Fund Name	3Y CAGR	Till Date CAGR
ICICI Prudential Equity & Debt Fund (G)	22%	14.8%
HDFC Hybrid Debt Fund (G)	10.1%	10.2%
ICICI Prudential Regular Savings Fund (G)	9.9%	9.9%
Canara Robeco Conservative Hybrid Fund	10.1%	10.5%
SBI Equity Hybrid Fund	15.7%	15.2%
HDFC Hybrid Equity Fund (G)	16.7%	15.5%
Baroda BNP Paribas Aggressive Equity Hybrid fund (G)	17%	12.6%
Kotak Debt Hybrid fund (G)	11.6%	8.2%

Source: Scripbox