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balanced equity oriented


What is a hybrid equity fund

Hybrid equity funds or hybrid equity-oriented funds are hybrid mutual funds that, unlike debt funds, invest most of their corpus into equity and equity-related instruments. As per the guidelines provided by the Securities and Exchange Board of India (SEBI), aggressive hybrid funds should invest 65% to 80% of their total assets into equity-related instruments. The rest is invested in debt instruments. Further, a fund house can offer either a balanced hybrid fund or an aggressive hybrid fund, but not both.

Hybrid equity fund growth

All mutual fund investments come on two flavours – Growth and Dividend. Hybrid equity fund growth option invests back all the profits into the fund, resulting in a quicker rise in the value of your mutual fund. A dividend option, on the other hand, pays out the dividend to the investor's bank account periodically. Remember that a dividend from a hybrid equity fund is given out from the NAV of the fund, and results in a corresponding drop in the NAV.

Factors to be considered while investing in a hybrid equity fund

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

  • Net asset value

    Net asset value or NAV is the market value of each unit of the hybrid equity fund. As the value of the underlying equity stocks varies through the market day, it is only calculated at the end of every market day. It represents the change in the value of assets that the hybrid equity fund invests into.

  • Fund Type

    Aggressive hybrid funds can be categorized based on the equity portfolio strategy. These could include diversified large-cap funds, small- and mid-cap funds, sector or thematic funds, and index funds among other possible strategies.

  • Fund Manager

    A fund manager implements the investment strategy identified for the give hybrid equity fund. He is responsible for selecting the equity stocks to invest in, and for ensuring that the diversification is in-line with the declared intent.

  • AUM

    Asset under management or AUM 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 the product of the net asset value of a hybrid equity fund and the total number of units. A higher AUM allows the fund manager to distribute the risks over a larger base.

Why should you invest in hybrid equity funds?

Despite being named aggressive hybrid funds, these type of funds is among the safest equity investments one can make. These are ideal for beginners and for investors looking to increase their equity exposure without taking up high risk. Investors looking to build a large corpus of funds can opt for a hybrid equity fund, growth option.