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 are actively managed funds. Fund managers can select investment avenues and instruments and take advantage of arbitrage options with an aim to earn higher returns. 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: Since these are actively managed funds and fund managers are free to leverage arbitrage opportunities, investors can expect a higher return potential when they invest in aggressive mutual funds but with higher risk.

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.

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