What are aggressive hybrid mutual funds?

Aggressive hybrid mutual funds are hybrid mutual fund scheme that focuses on investing in growth stocks that have relatively more aggressive earnings projections than the norm is called an aggressive mutual fund. According to SEBI, aggressive hybrid mutual funds can invest 65% to 80% of their total corpus in equity and equity-related instruments and the rest in debt and debt-related instruments. Aggressive hybrid mutual funds invest primarily in equities with a portion in debt. An SIP calculator can project returns from consistent investments in these funds.

Aggressive hybrid mutual funds are actively managed funds. Fund managers can select investment avenues and instruments to optimise return potential and balance risk. One of the main reasons behind the popularity of aggressive hybrid mutual funds is that they offer diversification with the potential of getting higher returns.

Features of aggressive hybrid mutual funds

Here are 4 things you must know about aggressive hybrid mutual funds:

Higher risk factor: Aggressive hybrid mutual funds, by definition, invest 65% to 80% of their assets in equity and equity-related instruments and carry a higher level of risk.

Return on investment: Owing to their orientation towards equities, investors can expect a better long-term return potential when they invest in aggressive mutual funds but with higher risk A lumpsum calculator can help you compare the potential returns of different investment avenues based on your investment amount, tenure and expected rate of returns.

Higher expense ratio: Now that you know the aggressive hybrid mutual funds meaning, you can already guess that these are actively managed funds. This also means that you may have to pay more to the asset management company in the form of expense ratios for your investment.

Suitable for medium-term financial goalsAggressive hybrid mutual funds tend to perform well in the medium-to-long term. You can invest in them for 3 to 5 years or more based on your medium-term goals such as planning a dream vacation, buying a luxury car, etc.

Advantages of aggressive hybrid mutual funds

Aggressive hybrid funds provide a range of advantages:

Diversification: They diversify across asset classes, including equities and debt, reducing overall portfolio risk.

Potential for higher returns: The equity component offers growth potential, aiming for relatively higher returns compared to pure debt funds.

Balanced risk: Combining equities for growth with debt for stability results in a balanced risk profile, suitable for various market conditions.

Tax efficiency: Long-term capital gains from equity investments are tax-exempt, enhancing after-tax returns for investors.

Who should invest in aggressive hybrid mutual funds?

You can invest in aggressive hybrid mutual funds if:

You are a new investor who wants to tap into the potential of equity investment schemes without stepping into pure equity schemes that carry a higher level of risk.

• You are a seasoned investor who wants to build a corpus for retirement or future investments.
• You are willing to make an investment with a high return potential that carries a moderate-to-high level of risk If you plan to invest regularly and want to align your SIPs with your growing income, a step up SIP calculator can help you structure your investments better, allowing you to gradually increase your contributions and potentially build a larger corpus over time.

For investors looking to use aggressive hybrid mutual funds to potentially generate a regular income stream, such as during retirement or for financial goals, a Systematic Withdrawal Plan may be useful. An SWP calculator can help you estimate how much can be withdrawn periodically without depleting the investment corpus prematurely.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.