Hybrid Funds– In the world of mutual funds, most people who do Systematic Investment Plan (SIP) know about equity funds and debt funds. In equity funds, money is invested in the stock market, where the possibility of returns is high. However, the risk is also high. On the other hand, debt funds usually invest in bonds and government securities. The risk in these is low, but the returns are also limited.
If you want the qualities of both these funds, i.e. balanced returns with low risk, then hybrid funds are for you. In these, a part of the investment goes into equity and the other part into debt. The advantage of this is that equity gives growth and debt gives security.
The asset under management (AUM) of hybrid funds increased to around Rs 8.9 lakh crore in August 2025. The highest inflow was seen in arbitrage and multi-asset funds. At the same time, the pace of balanced advantage and equity savings schemes remained somewhat slow.
In August, arbitrage funds under hybrid funds saw a net inflow of ₹6,666 crore. This is less than July but much more than last year. Multi-asset funds saw an investment of ₹3,528 crore. At the same time, balanced advantage funds and aggressive hybrid schemes recorded inflows of ₹2,316 crore and ₹1,870 crore respectively. Conservative hybrid funds also showed a marginal but positive flow of ₹44 crore.
How are hybrid funds different from other funds?
Equity funds are completely dependent on the stock market, so their value can decrease rapidly when the market falls. In comparison, the debt portion in hybrid funds absorbs the loss to some extent.
On the other hand, compared to debt funds, there is stability but the returns are limited. Due to the presence of equity in hybrid funds, the possibility of returns is better. This means that hybrids can give you higher returns with less risk.
Choose SIP according to the goal Not every SIP is right for every goal. If the goal is long term, like retirement or child’s education, then equity fund is the right choice. Whereas, debt or hybrid funds are better for medium term. The investor should choose based on his risk profile and time horizon. Periodic review is also necessary so that the SIP continues to move in the right direction.
How many types of hybrid funds are there?
There are many types of hybrid funds. In an aggressive hybrid fund, the share of equity is higher and debt is lower. Whereas, in a conservative hybrid fund, the share of debt is higher and equity is lower.
The specialty of Balanced Advantage Fund is that the ratio of equity and debt keeps changing according to the market conditions. Apart from this, there are also Multi-Asset Funds, which invest money in other asset classes like gold along with equity and debt.
Advantages and Disadvantages of Hybrid Funds
The biggest advantage of hybrid funds is that they maintain a balance between risk and return. These are an easy option for new investors as they are easy to manage. They can also give good returns if held for a long time.
But this is not a completely safe option. Equity component always comes with risk. Also, sometimes their proportion may not match your investment requirement. Taxation also depends on equity and debt component, which can be confusing for new investors.
Systematic Investment Plan (SIP) is considered one of the most reliable investment methods today. It is a disciplined way to create big money from small amounts. Know how SIP can convert your savings into wealth in a consistent and safe manner.
Who should invest
If you are investing in mutual funds through SIP for the first time, do not want to take much risk but want better returns than bank FD, then hybrid funds may be right for you. On the other hand, if you want to be very safe then debt funds or FD will be better. And if your perspective is long term and you can take more risk then equity funds can be a better option.
Hybrid funds are a balanced option in the world of investment. They are neither as risky as equity funds nor as limited as debt funds. Their biggest feature is that they give investors a combination of stability and growth by providing a balance of both. This is why they are often considered suitable for people who are just starting their investment journey and those who want a balanced approach.
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