Definition of hybrid fund
The funds in which the investment is divided among stock and lend are called as hybrid fund. As the name clears that the word hybrid means mixing of two things to make a superior quality thing. In the same manners the hybrid fund is available. This is made just to provide less risk of loss such as bonds. In this system the capital is not invested only in stock market but also managed with other investing options like bonds. The bond is less risky as compared to the equity fund so this facility is good for lessen the chance of risk. There are many types of hybrid funds. They are divided upon the percentage share of the invested money. It is basically divided in 7 types. Discuss about their types in brief-
Conservative hybrid fund
In this the investment in equity it lies between 10% – 25% of the total asset. The investment in debt instruments lies between 75% – 90%. It is an open ended hybrid scheme which invests predominantly in debt instruments.
Balanced hybrid fund
This is another type of hybrid fund. In the equity and its related instrument lies between 40% – 60%. In which the debt instrument is 40% and 60% of the total. The entry of arbitrage is prohibited. It is an open ended balanced scheme which invests in equity and debt instrument.
Aggressive hybrid fund
In this the equity and related term is between 40% – 60% of the assets. The debt instrument is between 20% – 35% of the assets. It is an open ended hybrid scheme investing predominantly in equity related instruments.
In this scheme the equity and debt are managed dynamically so it is also called as dynamic asset allocation. This is also an open ended asset allocation fund.
Multi asset allocation
As the name clears it helps you to invest in more than 2 asset classes. But the minimum allocation of at least 10% in each of the selected classes in compulsory. It is also an open ended and had to mention the other in which you invested.
This is less risky among all the above. It follows the mediator strategy. The minimum investment in equity and its related term of 65% of the total assets. This beneficial for those who want to take less risk. This is also an open ended type scheme investing in mediator opportunities. This is a type of defensive scheme.
The minimum investment in equity and its’ related instrument is 65% of the total asset. The minimum investment required or compulsory in the debt is 10% of the total assets. The allocation of the asset is under defensive considerations may also be termed in the document provided in the offer. This is a type of open ended scheme investing in equity, arbitrage and the debt.
Sometime it is observed that many consider aggressive hybrid fund and balanced hybrid fund together. So it might enlist as 6 types
How it is important
Well, the importance lies on your strategy and planning. If you plan to take low risk then this could be a good option. It is also true that the investment which has less risk also has less interest. The investment which has more risk has high interests. It could also be a good option if you are not in position to take much risk. In this your capital is divided among at least 2. If you get loss in one then it might be managed by the second. But it also has a problem if your equity gets much benefit then debt won’t give so much.
For whom this scheme is beneficial
Well, this is also depends on you. If you want to earn more then go for equity If you want more security from risk then go for hybrid If you are able to deal with the risk and idea to manage the risk then equity is much better. But if you are unable to do so then the hybrid will be the good option.