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BALANCED DEBT ORIENTED

Debt-oriented balanced funds are MF schemes that invest 65% of their corpus in debt and the balance in equities ,Debt-oriented balanced funds maintain their debt allocation between 65% and 75%.


What is hybrid debt fund?

A hybrid debt fund or a debt-oriented hybrid fund has been formally classified by the Securities and Exchange Board of India (SEBI) as conservative hybrid fund. Such funds predominantly invest in debt instruments intending to generate a secure income/ capital appreciation. SEBI stipulates that a conservative hybrid fund should invest 75% to 90% of its total assets in debt securities and money market instruments. The rest is invested in equity and equity-related instruments. Typically, the equity portfolio is diversified across major industries, market cap and sectors to ensure an acceptable risk-reward balance.

Factors to be considered while investing in a hybrid debt fund

Here are some of the factors you should consider when selecting a hybrid debt fund to invest in:

  • Net asset value

    Net asset value is the market value of each unit of the hybrid mutual fund. It is calculated at the end of every market day, and the variation represents the rise or dip in the value of assets that make up the debt hybrid fund.

  • Fund Type

    Always take a look at the type of fund you are investing into. Conservative hybrid funds can be categorized based on the preferred debt instruments that they invest in. Some examples include monthly income plans (MIP), liquid funds, long-term debt funds, and money market funds.

  • Fund Manager

    A fund manager implements the investment strategy identified for a chosen mutual fund investment. The fund manager decides what to buy and sell based on research and analysis available. In a passively managed portfolio, it simply means staying as close to an underlying index as possible, while in an actively managed portfolio the fund manager decides which securities to pick up.

  • AUM

    Asset under management is the total market value of investments managed by a mutual fund, money management firm, hedge fund, portfolio manager, or other financial services company. It is arrived at by multiplying the net asset value of a hybrid debt fund with the total number of units. Higher the AUM, more spread is available to a fund and therefore makes it a safer bet.

Why should you invest in hybrid debt funds?

An investment in a hybrid debt fund is considered a good option for investors looking for long term capital appreciation. The higher exposure to debt instruments keeps the risks associated with the fund low, while a small equity component promises a higher long-term return compared to a pure debt fund. Debt oriented mutual funds are also a good option for anyone looking to earn a passive monthly income from their investments.