The stock market fluctuations remain a challenge for investors. Also, after a long wait, the possibility of cutting the interest rate has increased. In such a situation, investment can be a wise step through aggressive hybrid mutual funds to adopt a balanced approach on the investment front.
Nirav R. Karra said, “A aggressive hybrid funds are perfect for investing in the current environment in stock market due to fears such as global economic uncertainty, inflation pressure and possible deduction. Due to balanced asset allocation, such funds are more capable of dealing with these challenges.
Fatima Pacha, Senior Equity Fund Manager of Mahindra Manuliff Mutual Fund, said, ‘Hybrid funds are suitable for all circumstances. These funds are the best for new investors in equity market, as they help in increasing confidence in the asset class.
Prevention of fluctuations
Under the aggressive hybrid fund, 65 to 80 percent of the asset is allocated in shares and the remaining bonds. Generally, these funds adopt a strategy of investing more in largecap shares for their equity portfolio. This helps in reducing the risk of fluctuations compared to portfolio with higher invested portfolio in midcap and smallcap stocks.
If the interest rates fall, the portfolio bonding part provides capital benefits. But if the interest rates increase, there may also be damage in the short term.
Karra said, ‘At present, more than 70 per cent of the allocation in this category is done in largecap shares. This gives stability to the portfolio and has a less impact of market fluctuations compared to the portfolio with high allocation in midcap and smallcap. Smallcap stocks are invested in 5 to 7 percent and the rest in midcap stocks. This reduces the risk related to midcap and smallcap in the equity portfolio of the fund. Midcap and smallcap shares are currently trading on higher evaluation. In addition, the date portion gives more stability to the portfolio. ‘
Largecap shares are generally in a better position than midcap and smallcap stocks to face situations such as economic recession and sluggish profits of companies.
Pacha said, “Hybrid funds perform weaker than the net equity fund in market conditions like FY 2024. But they give better returns even after a long -term risk as the market stance is generally cyclic. The stock market may be 2025 ups and downs after the last two years of excellent return. In this case, the performance of hybrid funds is usually better. Apart from this, we hope that the Reserve Bank of India will cut rates this year. This will help in giving more returns to date funds as bond prices may rise.
Who should invest?
A aggressive hybrid funds attract investors who want to invest in the stock market with relatively low fluctuations.
Karra said, ‘This fund is suitable for low risk-taking investors as it has a low risk of fluctuations due to date allocation. Apart from this, these funds are also suitable for new investors who want to enter the stock market relatively safely and whose financial targets are for mid -term. ‘
Keep these things in mind
Investors should assess their portfolio and select funds according to their ability to take risks. They should also look into the previous performance of the fund before investment. Although the speed of these funds is relatively stable, but sometimes there can be a phase of ups and downs. Therefore investors should consider investment for at least 5 years.
The most effective way to invest in these funds is Systematic Investment Plan (SIP). Karra said, ‘Inspector hybrid funds should be invested for at least 3 to 5 years. This helps the investor to deal with the effects of market cycles and gain balanced returns. He suggests that medium -risk investors can allocate 15 to 25 percent of their portfolio in this fund while low -risk investors should allocate 10 to 15 percent.