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Investing In Hybrid Funds In India; Does It Reap Good Returns?


Mutual funds come in all kinds of combination, including debt instruments like bonds, NCDs, fixed deposits and equity.


Investing In Hybrid Funds In India; Does It Reap Good Returns?
Hybrid Funds are funds that allow you to work in a combination of both debt and equity. So, you can largely mitigate your risks, against one asset class by investing in these hybrid funds.

Who should invest?

1) Those who look to diversify their mutual fund holdings.
2) Those who are willing to take at least some bit of risk.
3) Looking for a slightly superior rate of return than fixed instruments can offer.

Now, you can choose from the following categories:

Equity Hybrid Funds

Equity hybrid funds are funds that tend to chose to place higher amounts in equity rather than debt. So, if you are risk averse, you might not want to place large amounts in this type of fund. However, if the amounts invested in this fund is more than 65 per cent in equities than tax benefits would apply.

The fund manager may choose large amounts to be invested in equities. It is important to understand that if you are a retired individual, who is largely dependent on steady income, this may not be the fund for you.

Debt Hybrid Funds

Debt hybrid funds tend to invest more than 65 per cent of their fund into debt. These kind of funds are more suitable for those looking at taking less risk. Again, bulk of the returns would depend on market conditions. Over a longer term these funds tend to outperform most debt instruments including bank deposits.

Take a look at the performance of select hybrid funds:

Name of fund1 year returns2 years returns3 year returns
L&T India Prudence Fund-2.40%23.30%17.90%
SBI Magnum Balanced Fund-2.80%22.10%17.30%
UTI MIS Advantage3.00%13.20%10.80%

As can be seen some fund perform well over a longer period of time. L&T India Prudence Fund has given a decent return of almost 18 per cent over the last three years. The SBI Magnum Balanced Fund has also given good returns in the last 3 years, though returns from all the funds mentioned above have been poor in the last 1 year, as the Sensex has crashed almost 21 per cent from peak levels seen in March 2015.


As mentioned above, most of the Hybrid Funds have given decent returns in the last 3 years or so. Today, the markets are trading much lower than they were over the last 1 year. So, it maybe a good time to buy into hybrid funds, give the fact. Equity hybrid funds may look particularly attractive at the current levels.

Read more about: hybrid funds
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