Home ยป Should you Put Money into a Debt- or Equity-Oriented Hybrid Fund?

Should you Put Money into a Debt- or Equity-Oriented Hybrid Fund?

Hybrid funds are collective investment vehicles that often hold both equity and debt assets. Because of this aforementioned quality, these investments are referred to as “hybrid funds.” Due to its dual equity/debt investment strategy, hybrid funds are also known as multi-asset funds. There is a plethora of options available with hybrid investment vehicles. These options are broadly categorized into debt and equity-oriented hybrid funds.

But which option is ideal for you? Let us compare both and try to find an answer.

Hybrid mutual funds

Mutual fund strategies called “Hybrid Funds” diversify their holdings across many asset categories, including equities and fixed-income instruments. These funds seek to reduce overall portfolio risk by making investments across various asset categories. Hybrid funds may be less risky than equity funds but yet have the potential to provide higher returns than debt funds.

Types of hybrid funds

Aggressive Hybrid Fund

The assets of aggressive hybrid funds are invested between 65% and 80% in equities while the remaining assets are invested in debt and money market securities. These funds are riskier than more conservative hybrid funds because of their greater exposure to equities and equity-related securities, which has the potential to provide comparatively higher returns.

Conservative Hybrid Fund

Open-ended conservative hybrid funds invest the vast majority of their assets in fixed-income securities like Commercial Papers, Certificates of Deposit, Treasury Bills, Corporate Bonds, and other money-market instruments. Equity and equity-related products make up the balance of the portfolio. In comparison to a more aggressive hybrid fund, the volatility of these investments is lower, making them ideal for conservative savers and pension funds.

Dynamic Asset Allocation Fund

In response to changing market circumstances and the fund’s own internal investing methodology, a dynamic asset allocation fund allocates its holdings between equities and fixed-income securities on an ongoing basis. In every market environment, this fund is a good option for those who want to maximize their long-term risk-adjusted returns.

Multi Asset Allocation Fund

The funds in a multi-asset allocation portfolio put at least 10% of their total value into at least three different asset categories and adjust their allocation up or down based on market conditions. The majority of the assets held by these funds are equities, debt instruments, gold-related ETFs, and any other asset classes that SEBI may from time to time prescribe.

Arbitrage Fund

The goal of arbitrage funds is to generate returns by taking advantage of price discrepancies across several marketplaces. These funds acquire equities in the cash market and concurrently resell it via the futures market. On a tactical basis, arbitrage funds invest at least 65% of their total assets in equities and the remaining 35% in debt and money market instruments.

Equity Savings Fund

The equity savings fund invests in cash and derivative stock market possibilities, including equities, debt, and arbitrage. With a heavy emphasis on equities investments, this fund hopes to create income for its investors over the long term.


Choosing between the options should be based on your investment goals and risk appetite. You may choose to consult a financial advisor to help you with the choices.

Peter Christopher

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