What’s a hybrid fund?
Hybrid funds are mutual funds that invest in a mix of different asset classes, primarily equity and debt, but also include gold and real estate in some cases. Since the funds are a combination of equity and debt, they offer higher returns than pure debt funds and lower risk than pure equity funds. These offer diversification of assets in a single instrument, thereby providing stability of returns and risk-reward balance. It’s also an easy option for those who want to invest in multiple asset classes for diversification.#Operation Sindoor
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Types of hybrid funds
Sebi has classified hybrid funds into seven sub-categories based on the composition of asset classes in the fund.Aggressive: 65-80% in equity and equity-related instruments + 20-35% in debt instruments.
Conservative: 10-25% in equity and equity-related instruments + 75-90% in debt instruments.
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Multi-asset allocation: Investment in at least three asset classes, with a minimum allocation of 10% in each asset class.
Dynamic asset allocation or balanced advantage: 0-100% in equity and equity-related instruments + 0-100% in debt instruments.
Arbitrage: These follow the arbitrage strategy, with a minimum of 65% in equity and equity-related instruments.
Equity savings: Minimum 65% in equity and equity-related instruments (including arbitrage) + minimum 10% in debt instruments + derivatives (minimum for hedging to be specified in the scheme information document).
How are hybrid funds taxed?
Different categories of hybrid funds are taxed depending on their equity-debt composition and whether they were bought before or after 1 April 2023.
