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5 Major Points to Understand About Hybrid Funds


Paul is an amateur investor, but he is keen to make his portfolio more appealing by investing in mutual funds. However, Paul is confused if he wants to invest in debt or equity funds. His wife Stephanie, who works at the bank, introduces him to a mutual fund scheme called hybrid funds and persuades him to consider investing in hybrid funds. How? Read on.

What is Hybrid Mutual Funds?

Hybrid funds are a mutual fund scheme that invests in multiple asset classes, diversifying the fund and getting a maximum return with minimum risk. The fund manager allocates the fund based on the market condition and considers the goal of funds. Hybrid funds are primarily invested in equityand debt assets and sometimes in gold and real estate. Diversification helps to have multiple assets in a portfolio, and allocation helps distribute wealth efficiently.

5 Things to Know About Hybrid Funds

Risk Factor

Hybrid mutual funds are low-risk investments; however, they still carry a reasonable level of risks for investors. The hybrid funds that invest primarily in equity are said to pose a greater risk to your invested amount than those which mainly invest in debt securities. Investment in debt securities like bonds, commercial papers (CP), and Treasury Bills (Tbills) help reduce the risk and balance the risk faced by investments in equity.

Investment Horizon

Investors looking for long term returns may consider investing in equity mutual funds. Hybrid mutual funds investment works well if you have an investment horizon from 3 to 5 years. If you have a period of up to 5 years for investment, you may get good returns on your investment in hybrid funds. Most of the time, these returns in hybrid mutual funds are better than debt funds. Hybrid funds are an ideal option for anyone who is looking for medium-term financial goals. But it would help if you decided whether the hybrid mutual fund scheme is suitable for you after looking at your investment objectives.

Monthly Income Plan

The hybrid fund also offers an investment option known as a Monthly Income Plan (MIP), where only 15 to 20 percent of the collected money from the investors are invested in equity and the rest in debt funds. The payouts are received by the investor in the form of dividends. You can choose the frequency for payout like quarterly, monthly, half-yearly or annually. You also have the growth option for your investment in MIP, where you won't receive monthly or periodic payments in your bank account, and instead, the dividends received are reinvested to grow your corpus.

Dynamic Sell and Buy

The hybrid mutual fund gives the control to the fund manager to sell the fund’s assets when the price is high and buy when the price is low. You can take advantage of this facility by investing in the funds since the fund manager changes the asset allocation and could get better returns.

Fund Manager

The hybrid fund is beneficial for beginner investors because you don't have to invest and manage the funds on your own. The fund managers manage the fund's investment portfolio, and since the fund managers are professionals in the investment market, they can analyse the market. The market conditions also decide on a better investment option for your money and allocate the assets accordingly.


If you are new to investment in the securities market or don't have time and inclination to understand when to buy and sell stocks or other investments, hybrid mutual funds is a useful option for you. There are various types of hybrid funds which you can invest in depending on your needs. So take into consideration your financial goals, investment horizon and risk appetite before you decide to invest in them. You can ask your financial advisor to know more to aid you in making an appropriate decision before investing your hard-earned money.

Disclaimer - ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor 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 contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.The contents herein mentioned are solely for informational and educational purpose.

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