Hybrid funds have relatively lower risk as the fund allocation happens in both equity and debt. Investing in these schemes can help you leverage the opportunities for growth and mitigate the risk.
There are multiple hybrid funds, and an aggressive hybrid fund is one such type. In these funds, there is a fixed ratio of exposure in equity and debt.
Aggressive mutual funds are a scheme where about 65-80% of net assets get invested in equity and equity-related instruments. At the same time, the rest goes towards debt funds to provide a safety net against potential risks.
With investment in both asset classes, a hybrid aggressive fund offers the best of both in one investment product. Moreover, in these funds, the fund manager has more control over the assets as compared to other balanced hybrid funds.
With aggressive hybrid mutual funds, many fund managers have the opportunity to take advantage of arbitrage. Arbitrage is a growth strategy that allows fund managers to buy securities at a lower price from one market and sell at a higher price in another.
The difference in price can result in better returns. Since an aggressive hybrid fund is not a low-risk scheme, fund managers can apply such a strategy that can provide growth while taking controlled risks.
If you are planning to invest in hybrid funds, here are some benefits you get to enjoy:
You can diversify your portfolio to benefit from both, equity as well as debt funds
Fund managers mitigate risk by creating a balance between equity and debt funds after reviewing the market conditions, helping you earn better returns
Hybrid funds give you the best of both types, as they offer higher returns than debt funds and lower risk than equity funds
Investing in these funds is suitable for aggressive as well as risk-averse investors
Considering that these funds are riskier than other options, here are a few things to keep in mind before you invest.
While debt securities provide a cushion against the risks, exposure in equity investment is still high due to the asset allocation ratio. Furthermore, low-quality securities and small-cap stocks may also reduce your returns.
Before investing in aggressive hybrid mutual funds, it is imperative to analyse their past returns during different market cycles. This is because many funds exhibit excellent performance in upcycling, but the same can plummet during downward trends.
Choosing a fund like this can increase your risk but may also present an opportunity for better returns. By analysing, you can choose a fund that aligns with your risk tolerance and goals.
Some annual fees on charges apply when you invest in an aggressive hybrid fund, which is known as the expense ratio. A high ratio will reduce your net profit. Therefore, investing in schemes with a lower expense ratio is crucial to maximise profits.
The right fund is the one that gives you good returns, and aligns with your goals and risk tolerance. For this, you need to have clear investment goals for a given horizon, conduct research, and create an investment plan. You also need to compare different funds to choose the best one.
Since the major part of the investment is allocated to equity, the returns are taxed as such. On long-term investment, your capital gains of over ₹1 Lakh are taxed at 10% before indexation. However, you will have to pay a 15% tax on your short-term capital gains.
Keeping taxation in mind will allow you to plan your investment and make decisions accordingly. This way, you can save your taxes and ensure you get the most from your investment.
This fund type isn’t for everyone, and here are the types of investors who can consider it.
An aggressive hybrid fund has a moderately high risk and is volatile in the short term. As such, it is ideal for investors looking to stay invested for 3 to 5 years.
Since these funds have allocation in multiple asset classes and are moderately high-risk, they can be ideal for investors wanting to balance their portfolio. In fact, investors that have several low-risk instruments should venture into aggressive funds to generate higher returns.
Aggressive funds could lead to capital loss, especially in the first few years. As such, new investors may not have the ability to take on such losses.
On the other hand, seasoned investors can easily mitigate the risks and adjust to truly leverage the benefits of such funds.
Keeping the above in mind, you can rely on aggressive hybrid funds to generate wealth in the long run. Aggressive growth mutual funds, like any other funds, will perform according to market trends. Therefore, it is important to diversify the portfolio to mitigate the risk.
With Bajaj Markets you can invest in hybrid aggressive funds or any other scheme and diversify your portfolio easily. You can choose the best-performing schemes to invest in as per your financial goals and maximise growth.
Aggressive mutual funds are a hybrid mutual fund scheme where about 65-80% of the total funds are allocated in equity and the rest in debt funds. This way, fund managers mitigate the risks and make high returns.
Aggressive growth mutual funds are a good investment scheme if you have a higher risk appetite. Moreover, with a long-term investment, you can also reduce the exposure risk and generate wealth.
As the majority of asset allocation is in equity funds, it is better to invest for the mid to long- term. So, an investment term of 3 years or more will give you better returns.
The safety of aggressive hybrid mutual funds depends on the AMC and the fund. Generally, it can be classified as moderate to higher-risk investments, as equity funds have higher volatility.
However, you can invest in large-cap companies for a longer term as a risk management strategy.