Mutual Funds

What are Hybrid Mutual Funds?

Save & Invest

Hybrid mutual funds allow investment in two or more asset classes in the same fund. Your money may be put into different asset classes based on your selection. Apart from shares and debts, your money can also get divided among other asset classes like

  • Gold
  • Commodities
  • Real estate
  • Arbitrage
  • FD-like instruments

Each mutual fund has a particular combination in which your funds get distributed between assets and risk factors. You can pick any hybrid mutual fund that suits you.

Types of Hybrid Mutual Funds

There are different types of mutual funds in which you can invest your money in. How your money gets invested differs from one type of fund to another. So, the risks and expected returns vary from one fund to another. As an investor, you should understand the features of each type of mutual fund before choosing one.

Equity-Debt Allocation

In this category of mutual funds, your money gets distributed in different percentages between equity and debts. You can choose which fund to invest in depending on how much risk you want to take. Some popular funds in this category are:

  1. Aggressive Hybrid Fund – In this fund, around 65% to 80% of your money is allocated to shares. The remaining 20% to 35% gets distributed to FD-like instruments. There is a high rate of return and risk here as a big part of your money is invested in shares. Investors who lock in their money for more than three years can get meaningful returns. 
  2. Conservative Hybrid Fund – Your money will be distributed between stocks and bonds in this fund. Around 75% to 90% of your funds will be kept in FD-like instruments and bonds. The remaining 10% to 25% of your money will be held in stocks. This fund carries less risk as most of the money is in FD-like instruments and bonds. You will also earn higher returns than the bank’s FD rate for the same investment period. A 2 to 3-year investment in this fund may give you good returns.
  3. Equity Savings Fund – Your money will be divided equally among stocks, debts, and arbitrages. Fund managers will buy and sell stocks in different markets to minimise risk. You should invest in this fund for two to three years to get better returns than the bank FD rate. This hybrid fund best suits investors who want stable returns and low risk.


Some people want to take less risk but want a high return on their investments. The mutual funds listed below are ideal for such investors. These funds carry medium risks and may give satisfactory returns.

  1. Dynamic Asset Allocation Fund – This fund is also called a Balanced Advantage Fund. In this fund, your money gets divided between debts and shares. Your fund managers will increase or decrease your portfolio depending on the market. The main aim here is to give you good returns on your investment. A lock-in period of more than three years will help you to get a profitable return.
  2.  Multi-Asset Allocation Fund – Your money will be distributed among three asset classes. You can choose how much you want to invest in each asset class. You can put in a minimum of 10% or a maximum of 80% in one asset class. You can invest in gold, debt, equity, or real estate. You can also invest in any other asset class allowed by SEBI. Holding your money in this fund for more than three years can give your good returns. 


The Arbitrage fund is the only fund listed in this category. This fund has a special feature that makes it unique. In this fund, your money is invested in both the cash and the future market.

  1. Arbitrage Fund – You can earn good returns with this fund by buying and selling shares in two markets. Your fund managers will buy stock from the cash market at lower prices. This stock will be sold for a higher price in the futures market. This fund has a lower risk even though your money is in the share market. This is because the fund managers will know the stock prices in both markets. In this fund, around 65% of your money is put in shares and other instruments. You need to leave your money in this fund for 1 to 3 years to get profits.

Benefits of Hybrid Mutual Funds


  1. Diversity – You can distribute your money within a single asset class. You can put your funds in shares, debts, gold, real estate, or arbitrage. With a single investment, you can get exposure to different asset classes. 
  2. Medium-term goals – Hybrid funds are a great choice for investors who have medium-term goals. You can get good returns even if you invest for just three years. These funds carry low risk and are ideal for beginners.
  3. Better returns – Investors often get better returns on hybrid funds than the bank FD rate. When you compare your returns to the bank FD rate on your deposits for the same duration, you will see that your returns are higher than the bank rate. 
  4. Lower risk – Hybrid funds carry a lower risk than other investments. This is because here, your money gets divided among different asset classes. This helps to lower the risk and increases the chances of earning good returns. Due to this reason, hybrid funds are the best investment option for beginners.  
  5. Professional management – There is less stress when you invest in a hybrid fund. Your fund managers will keep track of your money for you. You don’t need to check the share markets and make transactions. Your fund managers will do this job for you to ensure good returns. They will monitor the share market to keep track of your investments. Your fund managers will buy and sell shares depending on the market conditions. 


Read more related blogs on the Piramal Finance website, or explore our financial products and services, such as personal loans, credit cards, and financial calculators. You can learn more about hybrid funds and can speak or chat with our financial advisors to clear your queries. You can also ask them to suggest the best hybrid mutual fund for you. Log in to the Piramal Finance website for more details.