Are you wondering where to invest amid market fluctuations? Then hybrid funds can be a great option for you. A recent Motilal Oswal Private Wealth (MOPW) report projected hybrid funds as a sensible investment strategy for the first six months of 2025.
Hybrid funds can help keep investors safe during market volatility. “These funds avoid losses by investing in fixed-income securities while enjoying gains from equities,” says Farhad Gadiwala, UTI Asset Management. That is, these funds help in keeping your investment safe and also give hope of good returns.
According to Mohit Gang, CEO of Moneyfront, hybrid funds are becoming attractive for investors who want to reduce risk. And the biggest reason for this is their diversity. “When you invest in different asset classes, losses in one can be covered by the other,” says Jayesh Faria, Motilal Oswal.
Hybrid funds help you get better returns with less risk. These funds maintain stability despite sudden falls in the stock market. “When the stock market falls, these funds are not affected that much,” says Gadiwala.
Additionally, these funds can also be beneficial in terms of tax.
Although hybrid funds are good for low-risk investors, they cannot expect high returns during bull markets. “In bull markets, where equity returns are good, hybrid funds may lag behind,” says Gadiwala. In addition, the fixed-income portion of some funds may be subject to credit and interest rate risks.
Your risk appetite and investment horizon will help you choose the right fund.
Conservative Hybrid Funds: These funds have 10-25% equity. “These funds are good for low-risk investors looking for regular income,” says Gadiwala.
Balanced Hybrid Funds: These contain 40-60% equity. “They show good growth as well as some fluctuations,” says Gadiwala.
Aggressive Hybrid Funds: These contain 65-80% equity. “These funds offer better returns, but with less stability,” says Faria.
Dynamic Asset Allocation Funds: These funds change their equity and debt investments according to market conditions.
Equity Savings Funds: These consist of 30-50% equity and arbitrage. “These are tax-advantageous debt funds,” says Gadiwala.
If you want to avoid the ups and downs of the stock market and want good returns with less risk, then these funds may be right for you. But if you are just looking for high returns, then you should stay away from them.