Reasons to invest in a balanced hybrid mutual fund


Investing can be a challenging process. You want to ensure you are doing everything in your power to grow your money. Also, you don’t want to take excessive risks and end up losing what you have worked so hard for. Thus, for those who want to play it safe while also seeing their money grow, a hybrid mutual fund, often referred to as a balanced fund, can be the smart choice.

A balanced hybrid fund is a type of mutual fund that invests in equity and debt instruments in a specific ratio to balance the risks and returns. The allocation percentage will depend on the investment objectives of the fund and the manager’s evaluation of the markets. However, all hybrid funds share one key feature – they offer investors the potential to earn higher returns with lower risk through higher diversification.

Even though many investors prefer investing in hybrid funds to get the best of both worlds – exposure to equities and debt – here are three more reasons why adding hybrid funds to your investment portfolio can benefit you.

  1. Diversification and risk mitigation

Diversification is one of the most important reasons to invest in hybrid funds. By investing in different assets and companies, you can reduce the risk of market volatility over time and get better risk-adjusted returns. For example, if you invest only in stocks, you may suffer a huge loss if the stock market crashes. However, if you invest in a mix of stocks and bonds, you can offset some of the risks associated with stocks. Also, the fund manager is responsible for rebalancing the fund as needed, making this a hands-off investment for those who don’t want to worry about market volatility.

  1. No need to invest in each asset class separately

Investing in a balanced hybrid fund is a convenient way to access different asset classes through one investment product. When you invest in a balanced hybrid fund, you do not need to spend time and money figuring out individual investments in different asset classes. You get the benefits of diversification through this one investment in itself.

  1. Get the exclusive benefit of each asset class

By investing in multiple asset classes, hybrid funds can benefit from the potential of each asset class. For example, equity investments have the potential to generate significant returns over the long term, while debt hybrid funds tend to be more stable and offer lower volatility. And finally, most hybrid funds also offer liquidity, depending on the type of fund, to help you access your money in an emergency. Thus, hybrid funds offer different levels of risk tolerance – from conservative to moderate and aggressive.

Closing thoughts

With diversification, convenience, decent returns, and access to multiple asset classes as key features, hybrid mutual funds offer an ideal combination of capital growth and a stable portfolio.

However, as a responsible investor, you must consider a few factors when selecting mutual funds to invest in. Check the fund’s cost and fees, past performance, and if the investment aligns with your goal and risk appetite. Most importantly, ensure that you can achieve your financial goals within the fund’s investment tenure.