What Are Hybrid Funds and Its Features?

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Hybrid funds are another type of Mutual Funds that aims to obtain the benefits of both Equity and Debt Funds. Hybrid funds are popular as a perfect blend of both equities and debt funds! These kinds of funds invest in both, debt instruments and equities to achieve maximum diversification and assured returns.

Hybrid funds approach to raise wealth appreciation, in the long run and focus to generate income in the short-term, through a balanced portfolio.

Features of Hybrid Funds

  • Diversification: Hybrid funds, invest in both Equity Funds (Growth Funds) and Debt Funds (Bond Funds), in order to give maximum diversification to investors portfolio, and with the same, maximum returns on investment.
  • Portfolio Balancing: Hybrid fund (prominently Balance funds) provide automatic portfolio balancing. This feature of hybrid fund benefits its investors, when the market is volatile, as when the market goes high, the fund manager automatically, invests in equities to mainta8in the high-level and vice-versa.
  • Tax Benefits: Hybrid fund invest in both Equity and Debt Instruments, so taxation is done accordingly.
  • Equity component Taxation: The equity component of hybrid funds is taxed like Equity funds. Long-Term Capital gains, more than Rs 1 lakh are taxed at the rate of 10%. Short-term capital gains are taxed at a rate of 15%.
  • Debt Component Taxation: The debt component of hybrid fund is taxed like debt funds. Short-term capital gains, from debt component, form part of the total income of the investor and is taxable according to his income slab. Long-term capital gains are taxable at the rate of 20% with the benefit of indexation, and at 10% without the benefit of indexation.
  • Avails the option of Lump-Sum and SIP investment: Investors can either invest via SIP or Lump-sum in hybrid funds as per their comfort ability.

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