Aggressive Hybrid Funds: Growth-Oriented Balanced Funds

What is a Aggressive Hybrid Funds ?

An Aggressive Hybrid Fund is an open-ended, equity-oriented hybrid scheme which invests a major part of its portfolio in equity and the rest in debt instruments.

Advantages of Aggressive Hybrid Funds

Long-term growth

Unlock the return potential of equity instruments and grow your wealth with a long-term investment horizon.

Portfolio diversification

Enjoy a diversified equity and debt portfolio to mitigate risks and enhance the return potential.

Automatic rebalancing

Aggressive Hybrid Funds are automatically rebalanced to maintain the equity-debt ratio to stabilise the risks and returns.

Higher Returns Than Pure Debt

With a significant allocation to equities, these funds generally offer the potential for higher returns over the long term.

Aggressive Hybrid Funds Returns Calculator

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Understanding Aggressive Hybrid Funds

Table of Contents

What are Aggressive Hybrid Funds?What are the features of Aggressive Hybrid Funds?What are the different types of hybrid funds?What should be the investment horizon for Aggressive Hybrid Funds?What is the tax implication of Aggressive Hybrid Funds?What are the payout options?Who should invest in Aggressive Hybrid Funds?

What are Aggressive Hybrid Funds?

Aggressive Hybrid Funds are equity-oriented hybrid mutual fund schemes that invest at least 65% to 80% of the total portfolio in equity and 20% to 35% of the portfolio in debt. These funds offer a good return potential with the added stability of debt.

What are the features of Aggressive Hybrid Funds?

Minimum 65% allocation in equities and 20% in debt
Moderate to high risk-return trade-off
Suitable for investors with a long-term investment horizon
Invest through SIPs or lump sum
Earn tax-free returns up to Rs.1 lakh if you stay invested for 12 months or more

What are the different types of hybrid funds?

Arbitrage Funds

Funds that invest in arbitrage opportunities. At least 65% of the fund is invested in equity

Equity Savings Funds

Funds that invest in equity, debt and arbitrage opportunities. A minimum of 65% of the portfolio is invested in equity and 10% in debt

Balanced Hybrid Fund

Hybrid funds which invest 40% to 60% of the portfolio in equity and the remainder in debt

Multi-Asset Allocator Fund

Funds that invest at least 10% of the portfolio in three different asset classes

Conservative Hybrid Fund

Hybrid funds which invest 75% to 90% of the portfolio in debt and the remainder in equity

What should be the investment horizon for Aggressive Hybrid Funds?

Aggressive Hybrid Funds are equity-oriented schemes
To avoid short-term volatility, a medium to long-term investment horizon is recommended
Arbitrage opportunities are when the price of an equity security is different in the spot or cash market and the futures or derivatives market
Such a horizon also helps earn attractive investment returns
You also get a tax benefit on staying invested for 12 months or more

What is the tax implication of Aggressive Hybrid Funds?

Aggressive Hybrid Funds attract equity taxation on the capital gains earned
Returns up to Rs.1 lakh are tax-free if you stay invested for 12 or more months
Returns exceeding Rs.1 lakh are taxed at 10%
For redemption within 12 months, returns are taxed at 15%
Dividends earned, if any, are taxed at your income tax slab rate

What are the payout options?

Dividend option

Earn dividends on your investment at regular intervals
Growth option

Accumulate the returns over the investment tenure and get a lump sum amount on redemption

Who should invest in Aggressive Hybrid Funds?

New equity investors

You can mitigate high risks with the debt component present in the portfolio
Investors looking to invest in debt and equity

Aggressive Hybrid Funds are a good choice if you want debt and equity exposure from a single fund.
Investors with a 3-5 year investment horizon

To ride out the short-term equity volatility, it is better to have an investment horizon of 3 years or more. Choose Aggressive Hybrid Funds if you can stay invested for 3 years or more.

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FAQs On Aggressive Hybrid Funds

Aggressive Hybrid Mutual Funds are a mix of equity and debt instruments with higher allocation in equity and stocks and limited allocation in debt funds. These funds typically have 65-80% investment in equity and the balance 20-35% in debt and FD-like instruments. This small debt component ensures some balance and stability to the equity exposure, also known as balanced funds. The key difference between aggressive hybrid mutual funds is its higher allocation to equities compared to other types of mutual funds and outperforming the other funds in terms of returns, though the risk involved is also higher.

Aggressive hybrid mutual funds are suited for investors who want capital appreciation with a moderate level of risk. These hybrid mutual funds are ideal for both new and experienced investors to generate wealth in the long term.

● First-time investors: These funds are suited for beginners who are new to investment in equities don’t want high risk and are looking for a balanced portfolio.
● Investors nearing retirement: Individuals who are near their retirement and don’t have accumulated retirement corpus, can also invest in aggressive hybrid mutual funds to create one with higher returns and capital appreciation.
● Investors with an investment horizon of three to five years: Individuals can invest in aggressive hybrid mutual funds for financial goals within three to five years as the majority of the amount is invested in equity which requires a moderate horizon to realise its full potential.

Aggressive Hybrid Funds are comparatively less risky than pure equity mutual funds. As these funds have a significant equity component, their value might fall less than the pure equity funds during market corrections. The risk of Aggressive Hybrid Funds includes changes in the interest rates affecting the debt instruments, and market volatility impacting equity holdings.

Returns on Aggressive Hybrid Funds vary based on the fund performance, market conditions and asset allocation. Aggressive Hybrid Funds generally underperform than the pure equity mutual funds in a rising market as a part of it is invested in debt instruments ensuring lower risk than equity. However, these funds aim for higher returns in the long run and the difference in returns between these funds and pure equity mutual funds is not substantial.

The taxation of Aggressive Hybrid Funds depends on its holding period. Though these funds invest in both equities and debt instruments, they are considered equity hybrid funds for taxation purposes as they hold more than 65% of investment in equities. Short-term capital gains which result from holding the funds for less than one year are taxed at 15%, and long-term capital gains exceeding Rs. 1 lakh during a financial year are taxed at 10%.

Further, the dividend on these funds is added to the income of the investor and is taxed at their normal slab rate and TDS is also applicable on dividends more than RS. 5000.