Investments are made with a singular aim. The said aim is to earn extra income through an investment scheme. Young professionals who are new to the Indian workforce aim to accumulate wealth that will help them to live their lives comfortably after retirement. To reach the said financial goal, they decide to invest a part of their monthly income in mutual funds. However, people generally don’t have a clear idea about the investment options that are available to them. Because of that, they invest without identifying their investment objectives or without identifying the right type of mutual fund. This action results in a failure to reach the said objectives. Yes, there are numerous types of mutual funds that are specifically catered to distinct investment needs.
People that invest in mutual funds can be categorized into three categories. The first category includes investors who are okay with taking risks and they invest in equity funds. The second type of investor is the one who plays it safe by opting to allocate funds to debt funds that assure investors with some returns while keeping money safe. The third category includes those who want the best of both. To meet that need people opt for hybrid funds. In case you want an investment scheme that provides investors with the merits of both equity and debt, hybrid funds are the solution.
What are the benefits of hybrid funds?
Here are some of the many reasons why you should consider hybrid funds for your investment portfolio:
- They are known for balancing risks with returns:
Amongst the main advantages of hybrid funds is that they enable you to strike the right balance between risks and revenue. In contrast to pure equity funds, these funds are known for offering the stability of assets such as debts. This helps your fund manager to experiment with high-return equity investments. This experiment is possible because of the presence of debt components, which serves as a cushion. Moreover, these funds can lower the risks of the equity component.
- You can enjoy access to multiple asset classes with a single hybrid fund:
Another benefit of hybrid mutual funds is that multiple asset classes. It means, that in the place of investing in different kinds of funds such as debt and equity funds to meet the need for different asset classes, you can access multiple asset classes in a single product, i.e., hybrid funds.
- You are exposed to several asset classes:
You will be introduced to different things like equity, debt, gold-related instruments, and other asset classes is another reason for you to consider hybrid mutual funds for investment. This exposure saves the investors the hassle of investing in asset classes separately. This helps in reducing the costs involved in investing in different asset class-based funds.
- These funds are not that volatile:
In contrast to equity funds, which are known for showing signs of market volatility, hybrid funds help flexibly manage your portfolio when a market is volatile. Plus, the debt component of these funds serves as a cushion.
- It is easy to diversify these funds:
Also referred to as balanced funds, these funds are known for offering investors an option to diversify their investments. That’s because these funds also allow you to allocate funds to both equities and debt. In case the share prices fall, the debt component of hybrid schemes ensures stability and serves as a cushion against market fluctuations.
How is it possible to invest in hybrid funds?
It is possible to invest in mutual funds in two ways. Listed below are those two ways:
- Lump-sum or one-time investment:
A simple definition of a lump sum investment is the act of paying the entire amount in one go. In case you have enough disposable income in your hand, you could opt for lump-sum mutual fund investment. If you don’t have a consistent source of income, you could opt to invest in lump sum quantities.
- Systematic investment plan (SIP):
A systematic investment plan or SIP is a type of investment mode in which it is possible to invest in hybrid mutual funds periodically. With SIPs, it is possible to schedule your investments at regular intervals such as monthly, quarterly, and semi-annually. Regularly investing in this manner might help you reach your financial goals. After choosing to allocate funds through SIP, you get a chance to fix things like the investment sum and even the duration of investments. Furthermore, you can even opt to automate your investments by leaving a standing instruction to your bank for a deduction for a particular date.