Out of all the different types of funds available, the most commonly used ones include debt or equity funds. But did you know that there is also another kind of fun you can invest in known as hybrid funds? Before we dive deeper into the multiple benefits of investing in hybrid funds, let us first understand what hybrid funds are to help you make a better decision on whether you should invest in this kind of fund or not.
What Are Hybrid Funds?
For anyone who is new to investment in funding, hybrid funds are a combination of both equity and debt instruments to help you achieve maximum diversification for your portfolio. Moreover, you will be able to avoid and manage the risk concentration involved. When you combine both debt and equity together under a hybrid fund, the returns offered are higher in comparison to a regular fund with lower risks involved, when compared to an equity fund. To know more about hybrid funds, check out: https://www.glideinvest.com/knowledge-center/hybrid-funds-guide-meaning-types-how-to-invest-in-2022.
Other than this, hybrid funds are also considered to be more secure, especially when the choice is between equity funds and hybrid funds. If you are wondering who can invest in hybrid funds, it is the wise choice for any budding investor who wants to slowly pace up and increase his/her knowledge of equity markets. Additionally, with the help of hybrid funds, you can safely withstand extreme market fluctuations when need be.
Types Of Hybrid Funds
The classification of hybrid funds is based on the allocation of assets as some have higher equity for allocation and some incline more towards debt. Some of the most common types include the following.
- Debt Oriented Funds
- Equity Oriented Funds
- Monthly Income Plans
- Arbitrage Funds
Top Benefits of Investing In Hybrid Funds
To further understand why hybrid funds are popular, let us discuss the top benefits of investing in hybrid funds below.
- The first and the most important benefit of investing in hybrid funds is that you get an opportunity of benefiting from diversification as hybrid funds are a combination of both debt and equity. This combination makes hybrid mutual funds balance out any type of market fluctuation to ensure complete stability. The only thing to keep in mind is to keep an eye out for the share price and always maintain the equity to debt ratio.
- The next benefit of a hybrid fund is that instead of investing big numbers in one go, you can start investing with small amounts per month with the help of SIP, based on the savings you want. Even though most people believe it does not make much of a difference, for first-timers, investing in hybrid funds and paying in small amounts throughout the month is a better choice.
- According to investors, the volatility of the market is in favor of hybrid funds and so investing in hybrid funds is beneficial. This is because the chances of higher returns are way more than when you invest in other types of mutual fund plans.
- Lastly, one of the most crucial benefits of investing in a hybrid mutual fund is that the investors get the opportunity to balance out the risks and returns effectively. Moreover, an investor has the choice of choosing a mixture of debt and equity as per their needs.
Therefore, in order to begin your investing journey, starting with hybrid funds is a good decision. However, while choosing the right hybrid fund for your investment, keep in mind factors like the performance, the appetite for risk, the expense ratio, etc. Hybrid funds offer the advantage of lower risks and increased learning with a higher potential for favorable returns. So, if you’re looking for stability in investment, go for hybrid funds.