These funds try to balance risk and return, by investing in equity, derivatives, and debt. Derivatives reduce directional equity exposure. This reduces the volatility and generates a stable return.
Hybrid funds are evaluated on the basis of consistency in return, fund management team, vintage, corpus, risk, return, and expense ratio. The best hybrid funds are those which consistently lie in the top 25% of their peer group over a period of time. However, it is important to see the risk that they have taken to achieve those returns. It is also important to look at the launch date to understand the period of existence and performance across the period.
Hybrid funds are funds that invest in a blend of more than one asset class. These could be debt/fixed deposit type of securities, equity, commodities (gold). Mostly hybrid funds invest in debt and equity in various proportions.
Balanced funds are just one type of hybrid funds. The name suggests balanced funds invest an equal amount in stocks and FD like instruments.
Even though hybrid Funds are considered riskier than debt funds, they are safer than equity funds. They offer comparatively returns and lower risks.
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