Hybrid Funds: Are you searching for Hybrid Funds? Then you have reached the correct place. Here, we will provide you information about what are Hybrid Funds and the Types of Hybrid Funds.
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Hybrid Funds are a type of mutual Funds which invest in different types of asset classes. These Funds are also referred to as the combination of equity, debt, and bonds.
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Using these Funds one can invest in different areas. Hybrid Class allows investing in different asset classes in order to obtain diversification and reduce risks that are associated with any one asset class. One can invest in these Funds by considering in mind various aspects of it.
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To which investors Hybrid Funds will be beneficial?
1. It is useful for all the people who are looking for both current income and long-term capital investment.
2. All the Individuals who are ready to handle moderate risks.
3. Individuals who are expecting higher growth potential as compared to other bond funds.
4. Investors who are ready to diversify their interest in both stocks and bonds within a single bond.
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Different types of Hybrid Funds
There are mainly two types of Hybrid Funds based on the Equity and Debt ratio:
1. Equity Oriented Hybrid Funds
This kind of fund invest major part in the equity segment. These funds will be more favorable for people who are less risks takers and believe in long-term investment.
Most of the time, the exposure to equity is around 65%, while in some cases investment in equity may rise to 75% or 80%. When equity is around 75%, the fund could increase the exposure to mid-cap stocks for higher returns.
2. Debt Oriented Hybrid Funds
Debt Oriented Hybrid Funds can be further classified into conservative, moderate or aggressive funds based on the exposure of equity funds. All these funds will have a different range of equity exposure. Here, conservative funds will have an equity exposure of 10 % while, moderate funds will have an equity exposure of 20% and aggressive funds will have an equity exposure of up to 30%.
The main purpose of these funds is to keep the capital safe by generating higher returns as compared to the main fixed deposit rates.
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But here is the Kicker:
Other Hybrid Funds
Apart from the above two, there are other Hybrid Funds such as Arbitrage funds. Arbitrary Funds are equity Oriented funds which take the main benefit from the difference in stock in the derivatives market and in the cash.
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In Arbitrage Funds, the fund manager looks of proper chances to generate maximum profit by buying stocks at a low price and selling them at a higher price. Also, these Funds have low risk. Apart from this, long-term returns which are gained from funds are tax-free. Keep in mind that, Arbitrage funds are not available simply. Whenever there is absence or shortage of arbitrage opportunities, funds will stay in debt or in cash. Due to this reason, they are included in Hybrid Funds.
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Last but not the least, there are some funds, which invest in gold along with equity and debt. However, the purpose is same: to diversify your investment in various funds, lower risks and increase more returns from the investor.
We hope that you got all the important details about Hybrid Funds. If you like this article, then please share it with your family and friends.
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