Hybrid funds operate between pure equity and pure debt funds, offering opportunities in both asset classes. They blend investments differently to achieve fund objectives. SEBI introduced Aggressive Hybrid Funds to distinguish them from balanced funds, allocating between 65% and 80% to equity. Let us understand Aggressive Mutual Funds and learn the key details about them.
What is Aggressive Hybrid Mutual Fund
In simple terms Aggressive Hybrid Mutual Funds are a type of hybrid mutual funds that allocate 65-80% of their assets to equity (stocks) and the remaining 20-35% to debt (bonds and money market instruments). Unlike balanced funds, they can exploit arbitrage opportunities, buying low in one market and selling high in another to profit from price differences.
Arbitrage involves buying a security cheaply in one market and selling it at a higher price in another. Aggressive Funds grant more freedom to managers, allowing them to pursue arbitrage and choose between growth or value stocks. Managers also select bonds with different interest rate sensitivities.
How does an aggressive hybrid mutual fund work?
To ensure stability, aggressive growth funds maintain a blend of equity and debt investments, adhering to SEBI standards which mandate a minimum of 20% allocation to debt and fixed deposit (FD)-like instruments. Equities offer long-term growth potential, while debt instruments provide income stability.
Aggressive hybrid mutual funds aim to merge the benefits of both equity and debt investments into a single portfolio. Achieving favorable outcomes necessitates patience and a long-term perspective, as the equity portion performs well during market upswings, while debt investments offer a protective buffer during market downturns.
Features of an aggressive hybrid mutual funds
The key features of aggressive hybrid mutual funds include:
- Returns and duration: Ideally suited for medium-term goals, though profitability may be affected by volatility and market fluctuations.
- Investment portfolio: With a heavy emphasis on equities, these funds carry a high-risk profile, making them inappropriate for risk-averse investors.
- Risk: As implied by the name, these funds typically exhibit high levels of risk within the mutual fund landscape.
Advantages of Aggressive Hybrid Mutual Funds
Aggressive Hybrid Mutual Funds offer several advantages, including:
- Diversification: These funds provide exposure to both equities and debt instruments, reducing overall portfolio risk through diversification.
- Potential for higher returns: With a strategic allocation to equities, Aggressive Hybrid Funds have the potential to deliver higher returns over the long term, outperforming traditional fixed-income investments.
- Risk management: The blend of equity and debt components helps mitigate market volatility and downside risks, offering stability during turbulent market conditions.
- Professional management: Aggressive Hybrid Funds are managed by seasoned fund managers who employ sophisticated investment strategies to optimise returns and manage risks effectively.
Who should invest in Aggressive Funds?
Aggressive Hybrid Funds cater to investors seeking to create wealth but do not want to invest in highly risky instrument like equity funds. These funds are ideal for individuals with moderate to high-risk tolerance who aim for steady capital appreciation over the long term.
Whether you are a first-time investor or a seasoned one, Aggressive Hybrid Funds offer a diversified investment avenue suitable for various financial objectives.
Factors to consider before investing in Aggressive Mutual Funds in India
- Assess the risks and returns: Understand the risk-return profile of Aggressive Hybrid Funds, considering both the equity exposure and debt component. Evaluate your investment horizon and financial goals to determine if these funds align with your objectives.
- Expense ratio: Pay attention to the expense ratio, which impacts the overall returns of the fund. Opt for funds with competitive expense ratios to maximise your investment gains over time.
- Selecting the right aggressive fund: Conduct thorough research and select Aggressive Hybrid Funds managed by experienced fund managers with a proven track record of delivering consistent returns. Analyse the fund's investment strategy, portfolio holdings, and past performance to make an informed decision.
- Aggressive fund taxation: Understand the tax implications associated with Aggressive Hybrid Funds, including capital gains tax on equity investments and tax on dividends. Familiarise yourself with the tax-saving opportunities and implications to optimize your investment strategy.
How to invest in Aggressive Hybrid Funds on the Bajaj Finserv Platform?
Investing in mutual funds on the Bajaj Finserv platform is quite easy. Follow these steps:
- Visit the Bajaj Finserv website or app and navigate to the ‘Mutual funds’ section.
- Click on EXPLORE FUNDS.
- Filter by scheme type, risk appetite, returns, etc. or choose from the top performing funds list.
- All the mutual funds of the particular category will be listed, along with the minimum investment amount, annualised return, and rating.
- Get started by entering your mobile number and sign in using the OTP.
- Verify your details using your PAN, date of birth. If your KYC is not complete, then you will have to upload your address proof and record a video.
- Enter your bank account details.
- Upload your signature and provide some additional details to continue.
- Choose and select the mutual fund that you want to invest in.
- Choose whether you want to invest as SIP or lumpsum and enter the investment amount. Click on ‘Invest Now’.
- Select your payment mode i.e., Net Banking, UPI, NEFT/ RTGS.
- Once your payment is done, the investment will be complete.
Conclusion
In conclusion, Aggressive Hybrid Mutual Funds present a compelling investment option for individuals seeking a balanced approach to wealth creation. By understanding the fundamentals of Aggressive Hybrid Funds and considering key factors before investing, investors can harness the potential of these funds and aim to achieve their financial goals and secure a brighter future.
Investing in Aggressive Hybrid Funds requires careful consideration of one's risk tolerance, investment horizon, and financial objectives. By leveraging the benefits of diversification, professional management, and growth potential offered by Aggressive Hybrid Funds, investors can navigate the dynamic investment landscape with confidence and resilience.
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