Hybrid Mutual Funds - Meaning & Types

07 Dec 2021|

1 min read |

by ICICI Securities Team

Introduction

Mutual Fund investors get broadly classified into three following different categories – risk-takers, safe players, and guaranteed return seekers. The first category invests in Equity Funds, while the second category opts for Debt Funds, and the third type is Hybrid Fund.

What are Hybrid Mutual Funds?

A Hybrid Mutual Fund invests in Equity and Debt instruments to enjoy diversification and reduce the overall risk. An ideal blend of Equity and Debt, a Hybrid Fund offers higher returns than Debt Funds and has lower risk than Equity Funds. It helps get an appreciation of wealth over the long term and generates regular income in the short term. If you are new to Mutual Fund Investment and want to get Equity exposure, consider Hybrid Funds.

Types of Hybrid Funds

Hybrid Funds get categorised based on asset allocation. Some funds have a high Equity allocation, while some others are inclined towards debt. Here are different types of hybrid funds.

Equity-Oriented Funds:

When the fund invests anything higher than 65% of the total assets in Equities, it is Equity-Oriented Funds. The balance gets invested in Debt and Money Market Instruments. The Equity aspect in the fund includes healthcare, finance, automobile, and some other sectors.

Debt-Oriented Funds:

They invest higher than 65% of the total assets towards Debt instruments. It includes fixed-income investments like Bonds, Debentures, Government Securities, Treasury Bills, and more.

Arbitrage Funds:

The fund manager here buys the stocks at a low cost in one market and sells them at a high price in a different market to generate high returns. But arbitrage opportunities are not readily available, and in such cases, the funds can get invested in Debt instruments. The fund is safer like Debt Funds. They get treated like Equity Funds when it comes to Long-Term Capital Gain Tax.

Balanced Funds:

They invest a minimum of 65% in Equity and Equity-related instruments and the balance in Debt instruments. For tax purposes, they are considered Equity Funds, but you get a tax exemption on the Long-Term Capital Gain of up to Rs. 1 lakh. Balanced Funds mitigate the volatility that comes with Equity investment.

Monthly-Income Plans:

This is a Hybrid Fund that primarily invests in fixed-income securities and has a small part allocated to the Equity and Equity-related instruments. It generates higher returns than the pure Debt schemes and offers regular income to investors. Such a Hybrid Fund is ideal for investors who do not want to take the risk of investing in Equity and want consistent income. It helps select a fund keeping the investment goals and risk appetite in mind.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

ICICI Securities Ltd. is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. ICICI Securities Ltd. is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Mr. Atul Agrawal, Contact number: 022-69997051, E-mail address: complianceofficer@icicisecurities.com Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. ICICI Securities Ltd. and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. AMFI Regn. No.: ARN-0845. PFRDA registration numbers: POP no -05092018. ICICI Securities Ltd. acts as a Composite Corporate agent having registration number -CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and ICICI Securities Ltd. is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and ICICI Securities Ltd. is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.

Did you enjoy this article?

46 people liked this article. Share Feedback

Recent Articles

View all

Understanding Contango in Commodity Markets

Understand contango in commodity trading, how futures prices differ from spot prices, and how financing, storage and insurance costs influence commodity pricing.

190 views

1 minutes

19 Oct 2026

Know Your Commodity Before You Trade: Copper

Copper is a widely used base metal known for its electrical and thermal conductivity, strength, ductility and corrosion resistance. It is used across electrical wiring, construction, machinery, power infrastructure and several industrial applications.

408 views

2 minutes

09 Oct 2026

Know your commodity before you trade - Natural Gas

Natural Gas is a widely traded energy commodity used for electricity generation, industrial activity, heating and other applications. Its prices can react sharply to weather, supply and demand, inventories, global energy markets and geopolitical developments.

676 views

1 minutes

30 Sep 2026