10 Best-Performing Conservative Hybrid Funds In India

Mutual funds

A conservative hybrid fund is a kind of hybrid mutual fund that invests 75%-90% of its overall assets in debt securities and the remaining 10%-25% in equity. That means this scheme invests a majority of its fund corpus in fixed income instruments like treasury bills, debentures, bonds, etc., and a limited portion in stocks. 

Want to invest in such funds? Check this list of 10 best-performing conservative hybrid funds in India. Read on!

List of Top 10 Conservative Hybrid Funds in India 

This mutual fund scheme has both debt and equity as its underlying asset class. So, a fund manager rebalances its portfolio daily to maintain the ratio of equity and debt as per SEBI regulations. Following is a list of the top-performing conservative hybrid funds in India:

Note: Returns and NAV (Net Asset Value) data as of March 7 2022   

Conservative hybrid funds such as Navi Regular Savings Fund invest at least 75% in fixed deposit-like instruments and 25% in stocks. These schemes can offer higher returns than fixed deposits and are suitable for risk-averse individuals. Visit Navi Mutual Fund and start investing with Rs. 500 only. 

*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

Benefits of Conservative Hybrid Funds  

Go through the various advantages of conservative hybrid funds:

• Offers Portfolio Diversification 

These schemes facilitate portfolio growth and diversification through investments in both debt and equity. Prominent exposure in debt securities safeguards the portfolio, offering stable returns. 

• Carries Lower Risk

The portfolio of these funds has been designed to carry a lower risk relative to other kinds of hybrid funds. The objective is to protect the principal amount and yield stable returns. Hence, to keep the risk and volatility low, debt instruments get higher weightage.

• Higher Returns than Fixed Deposits     

This fund has a track record of delivering higher returns than fixed deposits. The better returns are a result of the addition of equity in its portfolio. However, for earning higher yields, you will have to bear certain market risks that go hand-in-hand with investment in stocks.    

Also Read: Monthly Income Plans: Meaning, Overview And Benefits

Who Can Invest in Conservative Hybrid Funds?

• Investors Who are About to Retire 

If you are close to your retirement, you can afford to be a little bit conservative so that the profit doesn’t disappear with market fluctuations. These schemes can be a favourable option to deviate from regular equity funds prior to retirement. 

• Risk-Averse Investors Seeking more Returns than Fixed Deposits 

Returns from fixed deposits are reasonable, but they cannot beat the inflation rate by a high margin. After taking inflation into consideration, the yields from FDs will barely stick to 1-2%. Contrarily, returns from conservative hybrid funds have the potential to beat inflation owing to the equity exposure. 

• Investors who Wish to get Equity Exposure

An investor who doesn’t want to bear the risk of a pure equity portfolio but wants to get some equity exposure can choose these schemes. It is suitable for individuals who do not wish to risk their principal sum for the sake of achieving higher returns.  

Things to Remember Before Investing in Conservative Hybrid Funds 

Consider the following parameters before conservative hybrid funds:

• Expenses 

You will have to pay certain expenses while investing in mutual funds. Such costs can be an expense ratio and an exit load. A higher expense ratio can reduce your returns. So, you must pick a scheme with a lower expense ratio. 

• Fund manager’s experience

Fund managers play a crucial role in asset allocation and fund selection. Hence, an efficient management team having years of experience and expertise can design a scheme that has the potential to fulfil the objective that the fund was set up to achieve. 

• Past Performance of Funds 

Prior to opting for conservative hybrid funds, examining a fund’s past returns is vital. Although historical returns don’t guarantee future gains, it is imperative to research about the scheme’s past performance.  

• Investment Goals

Investment objectives of all individuals are not identical. Hence, you must ensure that the scheme’s investment goals align with your financial and personal goals. 

• Mode of Investment 

You can make a lump sum investment or opt for a Systematic Investment Plan (SIP) to invest in conservative hybrid funds. The lump sum mode facilitates a one-time investment in this type of scheme, while a SIP mode allows you to invest periodically, such as yearly, half-yearly, quarterly and monthly. 

Also Read: ESIP: Meaning, Benefits & How To Invest In Equity Systematic Investment Plan

Final Word

A conservative hybrid fund is a debt-focused hybrid fund; its returns are impacted by market fluctuations owing to the equity exposure. So, when the stock market is high, it can generate significant gains. If you’re a risk-averse investor, you can consider investing in this type of hybrid scheme.     

FAQs on Conservative Hybrid Funds

1. Are short term capital gains earned from conservative hybrid funds taxable?
   If you sell the mutual fund units before 3 years from the purchase date, then you will fetch short term capital gains (STCG). Such profits or gains will be included in your income and will be taxable as per your income tax slab.  
2. Are long term capital gains from hybrid funds taxable?
   In case you sell the mutual fund units after 3 years, then you will earn long term capital gains (LTCG). The tax rate on these gains will be 20%. Moreover, investors will be eligible for indexation benefits.     
3. What is an expense ratio?
   An expense ratio is a yearly fee that fund houses impose on investors to cover the cost of running the fund. The operating expenses of a mutual fund scheme include advertising expenses, management costs, distribution fees, and more. An expense ratio is inversely related to a mutual fund’s size.    
4. What is a mutual fund’s exit load?
   An exit load denotes a charge that a fund house levies on investors when they redeem the units of a mutual fund scheme before the completion of a pre-specified time period. The main purpose of this fee is to limit investors from leaving the scheme before the lock-in period ends. 
5. Can I save taxes through investment in conservative hybrid funds?
   No, conservative hybrid fund schemes are not tax-saving in nature. However, you can get tax benefits through investments in ELSS (Equity Linked Savings Scheme) funds. Section 80C of the Income Tax Act facilitates a tax deduction of up to Rs. 1,50,000 in a financial year for investing in ELSS funds.

Before you go…

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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.

This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.