Bajaj Finserv Multi Asset Allocation Fund
Hybrid Fund![ellipse-img](/sites/default/files/amcimages/Ellipse_6840.png)
Hybrid mutual funds are diversified investment vehicles that invest in both equity and debt securities. They seek to offer investors a balanced approach to investing that combines the growth potential of equities with the relative stability of debt investments.
There are multiple hybrid mutual fund categories in India, each with a different equity-debt ratio.
Hybrid mutual funds seek to balance risk and reward potential by diversifying across debt and equity. Equities offer the potential for significant capital appreciation in the long term. Meanwhile, debt offers lower return potential but is typically less volatile than equities.
Moreover, these two asset classes typically have a low correlation, meaning that they respond to market trends differently. So, when equities are surging, debt may be less attractive. Similarly, during a downturn, the prices of equities may fall, but debt may lend relative stability to the portfolio.
In this way, hybrid funds seek to combine the benefits of two or more asset classes in a single scheme, which can help it navigate different market conditions.
There are several hybrid mutual fund types in India, each with different portfolio compositions and investment strategies. Here’s a comprehensive list:
Note: A fund house can offer either an aggressive hybrid fund or a balanced hybrid fund.
Hybrid funds are suitable for investors seeking portfolio diversification and a balanced investment strategy. This may include:
To invest in a Bajaj Finserv AMC hybrid mutual fund, follow these steps:
You can also invest online as well as offline through your distributor or through aggregator platforms.
Diversification: Hybrid funds invest in a mix of asset classes, potentially mitigating overall portfolio risk.
Potential for growth: The equity portion of a hybrid portfolio provides opportunities for potential capital appreciation over the long term.
Reduced volatility: Debt securities provide relative stability and potential for income generation.
Ease of investment: Investors can start with a relatively small amount through a systematic investment plan (SIP).
Variety: Hybrid funds come in various types. Some are equity-oriented, some are debt-oriented, and some are evenly spread between the two asset classes. This allows investors to choose a fund that matches their risk tolerance and investment goals.
Risk management: By combining different asset classes, hybrid funds seek to potentially manage risk and optimise returns.
Here are some steps investors can take to decide where to invest:
Assess your risk tolerance: Equity-oriented hybrid funds are suitable for investors with higher risk tolerance, while debt-oriented ones suit conservative investors.
Define your goals: Identify your financial goals, such as wealth creation, regular income, or relative stability of capital, and your investment horizon. This will influence the equity-debt mix that is suitable for you.
Examine asset allocation: Based on these parameters, look at the fund's asset allocation strategy to select one that is suited to your requirements. Conservative investors or those seeking low volatility may prefer balanced or conservative hybrid funds. High-risk investors can opt for aggressive hybrid funds. Several balanced advantage funds and multi-asset allocation funds may also have an equity-oriented portfolio.
Check fund manager details: Look at the track record and experience of the fund manager, especially for dynamically managed funds.
Review risk assessments: Assess the fund’s risk metrics, such as standard deviation and beta. These indicate the fund’s volatility and sensitivity to market movements.
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Hybrid funds offer diversification by investing in both stocks and debt instruments, which can combine the potential for long-term capital appreciation with risk mitigation.
Debt mutual funds invest predominantly in bonds, money market instruments and other fixed income securities. Hybrid funds, on the other hand, typically invest in both debt and equity instruments.
Market risk – including volatility, economic downturns, sector-specific trends, and interest rates – affects both equity and debt portions of hybrid funds to varying degrees and can impact returns. Asset allocation risk can arise if the fund’s mix doesn't align with market conditions and a hybrid portfolio may offer lower returns than pure equity funds in certain market conditions. Additionally, underperformance or poor decision-making by fund managers can affect portfolio returns.
A balanced hybrid fund is a type of hybrid mutual fund. Balanced hybrid funds almost evenly spread their assets between debt and equity. They must invest a minimum of 40% and maximum of 60% in each asset class.
No mutual fund is completely safe. Hybrid funds do not offer fixed or guaranteed returns and there is no assurance of capital safety. However, such funds seek to mitigate risk through diversification. Debt-oriented hybrid funds may carry lower risk than equity-heavy ones.
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