What Are Hybrid Funds? + Their Types

Mutual funds are a good choice for investors who don’t have enough time to conduct their own investment research.

Additionally, considering different investor needs, mutual funds offer multiple options for different types of investors. Here in this article, we will be discussing hybrid funds which cater to a specific type of investors.

Hybrid Funds: Definition & Meaning

Hybrid funds, as the name suggests, are a category of mutual funds that invest in a mix of two or more asset classes: equities (stocks), fixed-income securities (bonds) and real estate etc.

Equity funds invest in equities (stocks) and debt funds invest in fixed-income securities (bonds). Equity funds aim for capital appreciation while debt funds aim for capital preservation along with some fixed income.

Hybrid funds aim to strike a balance between these two. Hence, they are also known as balanced funds.

Types of Hybrid Mutual Funds

To cater to various investor needs, hybrid mutual funds are further categorized into the following types. Let’s discuss.

  1. Aggressive Allocation Funds: Invest 65% to 80% in equity and the remaining in fixed-income instruments
  2. Conservative Allocation Funds: Invest 75% to 90% in fixed-income instruments and the remaining in equity
  3. Multi-Asset Allocation Funds: Invest in at least 3 asset classes ( stocks, bonds, real estate, commodities, etc.)
  4. Dynamic Asset Allocation Funds: Actively adjust asset allocation between equity and fixed-income instruments
  5. Balanced Hybrid Funds: Invest in equity and fixed-income instruments in nearly equal proportions
  6. Arbitrage Funds: Generate profits by exploiting price differences between markets
  7. Equity Savings Funds: Invest in equity, debt and arbitrage opportunities.

Pros & Cons Of Hybrid Funds

Just like any other investment vehicle, hybrid funds also come with some pros and cons. Have a look.

1. Offer a diversified portfolio by investing in different asset classes1. The combination of asset classes can make it challenging to understand for some investors
2. Spread risk across different asset classes2. May not outperform pure equity funds
3. Debt investments can provide a regular income3. Interest rate changes can affect fund performance
4. Suitable for a variety of investment goals4. May have higher expense ratios compared to pure equity or pure debt funds


  1. What are some examples of hybrid funds?

    Here are some examples of hybrid funds:
    1. SBI Equity Hybrid Fund
    2. Mirae Asset Hybrid Equity Fund
    3. SBI Conservative Hybrid Fund
    4. Quant Multi Asset Fund

  2. How are hybrid funds taxed?

    Hybrid funds are taxed according to the composition of the portfolio. For instance, If a fund invests 65% or more in equity, it will be taxed similarly to equity funds.

  3. How to invest in hybrid funds?

    Here are the steps:
    A. Register with any reputed online investment platform
    B. Open an account & complete KYC
    C. Research and select A hybrid Mutual Fund
    D. Choose the mode of investment i.e. lumpsum or SIP Investment
    E. Make the payment
    F. Review the performance periodically

A commerce graduate turned a digital creator to follow his passion for writing and sharing useful & well-researched information that adds some value to people's lives.

Leave a Comment