Hybrid mutual funds are mutual fund schemes that invest in multiple asset classes, including debt and equity to offer investors a diversified and balanced portfolio. The foundation of hybrid equity funds is based on three aspects- diversification, asset allocation, and correlation. Based on the scheme’s goal and asset allocation, there are several types of hybrid funds like balanced advantage hybrid funds, aggressive hybrid funds, and conservative hybrid funds, among others. To help you choose the right scheme, here’s a list of the 15 best performing hybrid mutual funds and their categories, benefits and tax implications.
Here is a list of the best hybrid funds to invest in India based on 3-year returns:
|Name of the Scheme||Features|
|Navi Equity Hybrid Fund – Direct Plan-Growth||NAV: ₹15.74|
AUM: ₹85.94 crore
Expense Ratio: 0.42%
|Quant Absolute Fund – Direct Plan-Growth||NAV: ₹320.02|
AUM: ₹949 crore
Expense Ratio: 0.56%
|BOI AXA Mid & Small Cap Equity & Debt Fund – Direct Plan-Growth||NAV: ₹24.16|
AUM ₹392.05 crore
Expense Ratio: 1.30%
|Kotak Equity Hybrid – Direct Plan-Growth||NAV: ₹46.81|
AUM: ₹3209.48 crore
Expense Ratio: 0.59%
|ICICI Prudential Equity & Debt Fund – Direct Plan-Growth||NAV: ₹264.19|
AUM: ₹21,281.63 crore
Expense Ratio: 1.20%
|BNP Paribas Substantial Equity Hybrid Fund – Direct Plan-Growth||NAV: ₹26.03|
Expense Ratio: 0.37%
|DSP Equity & Bond Fund – Direct Plan-Growth||NAV: ₹249.28|
AUM: ₹7529.22 crore
Expense Ratio: 0.83%
|Axis Equity Hybrid Fund – Direct Plan-Growth||NAV: ₹15.62|
AUM: ₹1829.45 crore
Expense Ratio: 0.94%
|Canara Robeco Equity Hybrid Fund – Direct Plan-Growth||NAV: ₹271.08|
AUM: ₹8405.74 crore
Expense Ratio: 0.62%
|Mirae Asset Hybrid Equity – Direct Plan-Growth||NAV: ₹25.23|
AUM: ₹7193.99 crore
Expense Ratio: 0.36%
|IDFC Hybrid Equity Fund – Direct plan – Growth||NAV: ₹18.682|
AUM: ₹574.82 crore
Expense Ratio: 1.15%
|Tata Hybrid Equity Fund – Direct Plan – Growth||NAV: ₹350.8866|
AUM: ₹3315.06 crore
Expense Ratio: 1.03%
|PGIM India Hybrid Equity Fund – Direct Plan – Growth||NAV: ₹107.45|
AUM: ₹222.94 crore
Expense Ratio: 0.69%
|JM Equity Hybrid Fund – (Direct) – Growth||NAV: ₹78.6484|
AUM: ₹11.15 crore
Expense Ratio: 1.16%
|Union Hybrid Equity Fund – Direct Plan – Growth||NAV: ₹12.79|
AUM: ₹549.04 crore
Expense Ratio: 1.46%
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
A detailed overview of the best hybrid funds to invest in 2023 are given below.
Considered as one of the best hybrid funds to invest in India, this scheme has been a consistent performer in the category of hybrid funds and has managed to maintain an annual return percentage of 3.79% for investors. The fund’s objective is to obtain and offer significant returns and capital appreciation over a long-term.
Also considered as one of the best performing hybrid funds, this mutual fund has a balanced investment in all categories of companies which is regularly managed by a skilled asset management team. Majority investment of this fund is in domestic equities which is 79.07%.
Also recommended as one of the best hybrid funds to invest in 2023, this fund also offers significant returns to investors and aims to offer capital appreciation not only through equities but also through debt securities. However more than 80% investments of this fund are in equities.
This fund is suitable for long-term investment objectives. It grows its investments through a safe balance between equity related investments and debt and Government securities. It invests more than 71% in equities.
Considered as one of the best performing hybrid funds, this fund is suitable for investors who have a moderate to strong risk appetite for equity instruments. You can invest in this fund for long term equity returns. It invests more than 12% of its investments in Government securities.
This fund has a 2 star CRISIL rank and is considered a below average performer in the category. However it is important to note that it invests above 20% in Government securities.
This fund is suitable for you if you want to balance your portfolio and enjoy the benefits of both bonds and equity. Around 70% of the total fund is invested in equities and the rest is divided into Government securities and debt funds.
It is an equity focused fund with around 76% of investment in equity securities. You should invest in this fund if you want to earn long term investment gains from equity assets.
This fund has a diversified holding list and invests little less in equity than other funds in this category. The total equity investment for this fund is only around 72%.
This fund has gradually increased its total fund size from around ₹1882 crore to ₹8405 crore approximately. Thus it is a good fund to invest through Systematic Investment Plan (SIP) format. You can expect to see significant returns. However it is subject to market risk.
This hybrid fund is ideal for investors who prefer large cap funds as investment options. It invests around 76% of its total funds out of which around 50% is in only large cap funds.
This fund has a strong management team and is preferred by investors in the hybrid fund category. However it has a high NAV value as compared to other funds.
Only 68.56% of total assets of this fund is invested in equity out of which more than 38% is invested in large cap. Rest of the funds are invested in debt, low-risk securities and Government securities.
This is also an equity focused fund that invests mostly in equities but also invests in debts and other securities to balance the risk factors. It is one of the best hybrid funds to invest in 2023 with 75% of the total assets invested in equities.
It is one of the best performing hybrid mutual funds with a total equity investment of this fund is 74% approximately. Out of total equity investment this fund is distributed into large, mid and small cap equities. However there are no foreign investments.
Here are some of the different types of hybrid mutual funds:
As per the rules of the Securities and Exchange Board of India (SEBI), these schemes need to invest at least 65% and a maximum of 80% of the fund corpus in stocks and equity-related instruments.
The high equity exposure of aggressive funds provides investors with the possibility of earning high returns. That said, the underlying debt instruments cushion the impact of stock market fluctuations.
These hybrid mutual funds must invest in more than two asset classes. Moreover, the proportion of investment in each asset class needs to be at least 10%. Fund managers of these funds decide the asset allocation, keeping in mind the objective that the scheme was set up to achieve.
As per SEBI regulations, these funds must allocate 10% to 25% of the investment corpus to stocks and equity-related instruments. The rest of the financial assets, i.e., 75% to 90% of the fund corpus, need to be invested in debt instruments.
Such schemes are suitable for investors who aim to generate stable income. The equity portion of the portfolio boosts the overall returns of a conservative hybrid fund.
Arbitrage is an investment strategy, which involves purchasing securities in the cash market and selling them simultaneously in the futures market to make financial gains. These hybrid equity funds follow this strategy to generate stable returns for investors.
SEBI’s rules make it mandatory for these schemes to invest 65-100% of the financial assets in equity and equity-related instruments.
Balanced hybrid funds allocate at least 40% and a maximum of 60% of the pooled funds to both equity and debt instruments. Note that the fund manager of these hybrid schemes cannot utilise the arbitrage strategy to generate returns for investors.
An equity savings fund invests in equity, debt and derivatives with the aim to balance the portfolio risk and returns. These hybrid mutual fund schemes invest a minimum of 65% in equity, while the remaining (10-35%) is invested in debt instruments and derivatives.
Here are some of the advantages of investing in a hybrid mutual fund:
Since hybrid equity funds allocate the financial assets to multiple asset classes, individuals can get exposure to multiple asset classes by investing in a single mutual fund scheme.
Fund managers of hybrid funds alter the proportion of investment in equity and debt, which are non-correlated asset classes to manage portfolio risk.
Hybrid funds offer portfolio diversification by investing in multiple asset classes and their sub-classes. For example, the equity portion may comprise stocks across different market capitalisations.
There are different options available for investors with low, moderate or high-risk appetites. An investor with low risk-bearing ability may consider investing in funds that primarily invest in debt, for example, the Navi Regular Savings Fund.
On the flip side, individuals with a high risk-bearing capacity can choose to invest in an equity-oriented hybrid mutual fund scheme, such as the Navi Equity Hybrid Fund.
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Fund managers with years of experience in the investment world help rebalance the portfolio of such mutual fund schemes as per the market scenario. On account of this, investors do not have to monitor the performance of securities all the time.
Moreover, individuals don’t have to make investment decisions, which can be challenging considering the dynamic nature of the market.
Here’s how you can invest in a hybrid mutual fund scheme:
Hybrid mutual funds have a higher yield potential than fixed deposits or other asset types. Some of their features include:
Hybrid mutual funds are essentially more rewarding than fixed deposits (FDs). These funds offer investors to capture the potential of equity investments and the stability of debt investments. While investors can expect solid returns from equity, debt funds provide stability and safeguard one’s portfolio from potential risks.
Investing in hybrid funds is essentially an avenue for diversifying one’s profit generation. Since these funds invest in multiple asset classes, it gives investors the opportunity to have a balanced and well-diversified portfolio.
Some hybrid funds are not static as compared to other assets like fixed deposits. They allow investors and fund managers to deal with price changes instantaneously.
When hybrid funds invest at least 65% of the fund corpus in equity and equity-related instruments, they are taxed as equity funds. This means that short term capital gains (STCG) attract 15% tax every year while long term capital gains are subject to 10% tax annually.
Note that individuals do not need to pay capital gains tax if their long term capital gains do not exceed Rs.1 lakh.
On the other hand, if hybrid funds allocate a minimum of 65% of the investment corpus to debt instruments, they are taxed like debt funds. Accordingly, short term capital gains are taxed according to the individual’s income tax slab rate. On the other hand, a flat tax rate of 20% is applicable on long term capital gains along with indexation benefits.
Hybrid mutual funds are a suitable for investors who:
Hybrid mutual funds are more rewarding than many other asset types. However, there are a few drawbacks, which are:
Volatility is a necessary shortcoming that makes investments both rewarding and risky. Like any other investment avenue, even the best hybrid mutual funds are subject to market fluctuations. Investors can lose if the market price falls drastically.
Debt securities with lower credit ratings can lead to significant losses in the principal amount. Additionally, a sudden rise in interest rates can also adversely affect bond prices, the burden of which will be faced by investors.
Inability to handle debt and equities simultaneously implies higher risks. If the fund managers do not necessarily resonate with the investor’s intention, hybrid mutual funds may prove to be a risky investment option.
Make sure to take the following aspects into consideration before allocating your savings to any of the best hybrid funds:
The expense ratio is an annual fee that every asset management company (AMC) imposes on investors of a mutual fund scheme to cover the expenses incurred for running the fund. Therefore, make sure to compare the expense ratio of different hybrid mutual fund schemes before opting for a scheme.
Remember, the expense ratio is not the only parameter. There are other factors that you must consider.
This refers to the financial goals that you want to fulfil. It could be financing your child’s education or building a retirement corpus. Identify your investment goal and make sure that it is in line with the fund’s objective before investing.
The risk-bearing ability is not the same for all investors. While some may have a high-risk appetite, others may want to take minimum risk. Hence, it becomes essential for investors to assess their risk profile before investing in the best hybrid mutual funds.
Investors with high-risk bearing capacity may consider investing in a scheme that primarily invests in equity and equity-related instruments. On the other hand, risk-averse individuals may consider investing in the best hybrid funds that allocate the majority of their fund corpus to debt securities.
For individuals who are looking to invest in hybrid mutual funds, it is crucial to check a fund’s historical performance and compare it with that of other schemes of the same category. The past returns of a scheme indicate if the fund has been run well enough.
That said, keep in mind that the historical performance of a fund does not give any indication in relation to its future performance.
When choosing a hybrid mutual fund, it is vital for investors to consider the track record and experience of the fund manager. After all, they’re all actively involved in all buy-and-sell decisions. In other words, whether or not a scheme will be able to fulfil its predetermined objective depends upon the efficiency of a fund manager.
Individuals have two options when it comes to the investment mode- lump sum and SIP. The first route allows investors to allocate a large sum of money to a mutual fund scheme all at once. That said, if one chooses a SIP, he/she can invest a certain amount at regular intervals (monthly, quarterly, etc.).
Investing in the best hybrid mutual funds can be a prudent move for individuals who aim to diversify their portfolio and maximise their return on investments. That being said, there are different types of hybrid funds available. Some invest more in equity, some are flexible and invest based on market conditions, and some have more corpus allocated towards debt. Choose the scheme that’s aligned to your investment goals.
Here’s something for investors who have just started out with mutual funds. Your portfolio should consist of equity investments if you want to achieve inflation-beating returns. If you think investing a lump sum amount in equity could be a bit risky, you can always start small. With Navi Mutual Fund you can start investing in a wide range of mutual fund schemes across sectors at just Rs.10! Explore and start investing today.
Ans: No, hybrid mutual fund schemes do not come with a lock-in period. Individuals can choose to redeem their units at their convenience. One simply has to place a request with the asset management company (AMC).
Ans: When it comes to choosing the investment duration, there is no readymade solution. Your investment time horizon completely depends upon your financial objectives. That said, keep in mind that the longer the duration of investment, the higher the potential returns owing to the power of compounding.
Ans: Exit load refers to a charge that an AMC imposes on an individual if he/she sells the units in a scheme before a certain timeframe. Note that an exit load may not be imposed in the case of all hybrid fund schemes.
Make sure to read the scheme related documents before investing to know whether an exit load will be applicable upon premature redemption.
Ans: A direct plan in mutual funds is offered by fund houses to investors directly. This means that no financial intermediary (broker/distributor) is involved in the transaction. On the other hand, in the case of regular plans, individuals have to route the transaction through a broker or distributor.
Ans: A systematic withdrawal plan (SWP) enables you to withdraw a fixed/variable amount from a mutual fund scheme at fixed intervals, for example, quarterly, yearly, semi-annually, etc. In simple terms, it’s the opposite of a SIP.
Ans: Hybrid funds are mutual funds that invest in two or more individual assets. Assets generally involve bonds and stocks. However, they may also include assets like gold and real estate investment.
Ans: The best hybrid fund is the one which offers a decent annualised 3-year return, is consistent and has a higher rating. Some leading hybrid fund options include,
– Quant Absolute Fund
– ICICI Prudential Thematic Advantage Fund
– Baroda BNP Paribas Aggressive Hybrid Fund, to name a few.
Ans: Hybrid mutual funds are a type of mutual funds that invest in a mixed list of asset classes like equity and debt securities. The primary aim of hybrid funds is to provide investors a diversified portfolio with a mix of equity and debt holdings.
Ans: First, you need to make sure that the hybrid fund you’re planning to invest in is aligned to your investment goals and risk tolerance. If the fund ticks all the right boxes in terms of alignment, check the fund’s performance in the last 5 years. A fund that has performed consistently for the last few years could give you a fair idea on its future performance, though this should never be considered as the holy grail of fund selection. Also, consider expense ratio, exit load and other factors before investing.
Ans: Hybrid funds invest both in equity and debt. However, some hybrid funds are more equity oriented while some are debt oriented and some are flexible in investment approach based on market conditions.
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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.
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