What Are Aggressive Hybrid Mutual Funds?
Aggressive Hybrid Mutual Funds are a type of investment fund that mainly focuses on stocks but also includes some debt instruments for stability. These funds can invest up to 75% in stocks while keeping at least 25% in safer options like fixed deposits and bonds.
This mix of investments makes aggressive hybrid funds less risky than pure equity funds while still offering a good potential for high returns over time.
How Do Aggressive Hybrid Funds Work?
These funds work by combining two types of investments:
- Equity (stocks) – Helps in growing your money over the long term.
- Debt (bonds, fixed deposits, etc.) – Provides stability and regular income.
According to investment rules, these funds must invest at least 20% in debt instruments, while the rest can be allocated to stocks. This ensures a balance between growth and safety. The equity portion grows your wealth when the stock market is doing well, while the debt portion acts as a cushion when the market is down.
Who Should Invest in Aggressive Hybrid Funds?
These funds are ideal for different types of investors:
- Beginners in Stock Market: If you’re new to investing in stocks but don’t want high risk, this fund is a good starting point.
- Investors with a 3-5 Year Plan: These funds are great for medium-term goals like buying a car or planning a vacation.
- Near-Retirement Investors: If you are close to retirement and haven’t saved enough, investing in an aggressive hybrid fund can help you build a retirement corpus.
Things to Consider Before Investing
1. Risk Factor
These funds are less risky than pure stock funds but still carry moderate risk because of their equity exposure. If the stock market falls, the fund value will also drop, but not as much as a pure equity fund.
2. Returns
While aggressive hybrid funds may not perform as well as full equity funds in a booming market, they provide more stability during market downturns. Over the long term, the difference in returns between the two types of funds is not very significant.
3. Financial Goals
These funds are best suited for medium-term goals like buying a car or funding a vacation. However, if the market fluctuates, you may need to extend your investment period.
4. Expense Ratio
Mutual funds charge an annual fee (expense ratio) for managing your money. Choosing a fund with a lower expense ratio can help maximize your returns.
Taxation on Aggressive Hybrid Funds
These funds are taxed like equity mutual funds:
- If you sell within one year, you pay 15% tax on profits (Short-Term Capital Gains – STCG).
- If you hold for more than a year, you can earn up to ₹1 lakh tax-free. Profits above ₹1 lakh are taxed at 10% (Long-Term Capital Gains – LTCG).
- Dividends are added to your total income and taxed according to your income tax slab.
- If dividend income exceeds ₹5000, TDS (Tax Deducted at Source) will be applicable.
Benefits of Aggressive Hybrid Funds
- Diversification: These funds balance risk by investing in both stocks and debt instruments.
- Ease of Investment: No need to buy multiple funds—this fund does both equity and debt investment for you.
- Automatic Rebalancing: Fund managers adjust investments to maintain a balanced portfolio.
- Tax Benefits: Even with debt exposure, these funds enjoy equity taxation benefits.
- Lower Volatility: Less risky than pure equity funds since the debt portion provides stability.
5 Aggressive Hybrid Funds in India
Here are some of the best-performing aggressive hybrid funds based on returns:
| Fund Name | 3-Year Return (%) | 5-Year Return (%) |
|---|---|---|
| UTI Aggressive Hybrid Fund -Growth | 15.6% | 18% |
| Canara Robeco Equity Hybrid Fund -Growth | 11.2% | 13.5% |
| HDFC Hybrid Equity Fund -Growth | 11.7%% | 15.1% |
| Mahindra Manulife Aggressive Hybrid Fund -Growth | 14.4% | 17% |
| Edelweiss Aggressive Hybrid Fund -Growth | 15.4% | 16.6% |
Before choosing a fund, consider your investment goals, risk tolerance, and time horizon to find the best fit for your needs.
Final Thoughts
Aggressive Hybrid Mutual Funds are a great choice for investors who want high growth with some safety. They are perfect for beginners, medium-term investors, and those nearing retirement. By balancing stocks and debt instruments, these funds offer steady growth with lower risk than pure equity funds. If you’re looking for a smart way to grow your money while managing risk, an aggressive hybrid fund could be the right investment for you!
Ravi Chandra
Mutual Fund Distributor ARN-317654
