If you are someone who is interested in investing or knows a lot of investors, you might have come across a particular name of mutual funds called hybrid funds. Now, not everyone is expected to know the basic nitty-gritty about hybrid funds.

So, let us break down the different aspects of hybrid funds in detail. The first thing which is most important to know about hybrid funds is what it actually stands for. There are three different types of mutual funds available including hybrid funds, debt funds, and equity funds. Hybrid funds are known to offer better returns at lower risk. The main idea behind hybrid funds is that you do not choose one asset class to invest in. You instead have the choice to tailor your investment according to your suitability, time at hand, and goals for the investment. Click here to know more about hybrid funds.

Types Of Hybrid Funds

Now that we have discussed the basics of hybrid funds and how they work, let us discuss the different types of hybrid funds available today.

Debt Oriented Funds

Just as the name suggests, under this type of hybrid fund, the majority proportion of your investment or at least a minimum of 65% of your investment is made through debt. This is highly suitable for those investors who are looking into getting fixed income regularly with low risk involved.

Equity Oriented Funds

Under an equity-oriented hybrid fund, the majority proportion of your investment, or at least 65% of your investment is through equity. The remaining 35% is invested in commodities like bonds, bills, government securities, etc. This particular type of hybrid fund is beneficial for anyone new in the stock market as the opportunities for maximizing wealth without the stress of loss are high here.

Monthly Income Plans

If you are looking for stability when it comes to investment, monthly income plans are highly beneficial as they help you generate income regularly through dividends. The proportion of the investment division is 20% in equity and remaining in debt.

Arbitrage Funds

Under this type of hybrid fund, a strategy is used to divide your investment between equity and debt. The main intention is to maximize your returns by buying the stocks at low prices and then selling them at a price higher than what you bought them for.

Benefits of Investing In Hybrid Funds

After discussing the basics of hybrid funds and the different types available in the market today, some benefits of investing in hybrid funds include the following:

  • The first advantage of investing in hybrid funds is that you have the option of choosing the hybrid fund investment based on your risk tolerance or capacity. As opposed to other mutual funds, hybrid funds offer investment at a lower risk because of the effective allocation of assets.
  • Under hybrid funds, you can also use a systematic investment plan for payment under which you will have to invest regular smaller amounts. The only requirement is to set up the SIP with the account to allow the bank to deduct a small amount of money from your account every month.
  • Lastly, with hybrid funds, you can enjoy a diversified portfolio without having to research a lot about different stocks for investment. This is important as it allows you to collect and maximize your gains while minimizing or eliminating any risks, especially financially.

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Overall, if you are just starting your investment journey, going forward with hybrid funds is a good decision. It has a list of different types under its umbrella and you can therefore choose the one that fits your requirement the best. You do not need a strong investment background to begin investing in hybrid funds so begin today.