0 hidden charges. 0 forex

Hybrid Mutual Funds - Definition, Types and Benefits

Reviewed by
Created on
April 25, 2023


What’s Inside

Many types of mutual funds are in the market, such as debt, equity, etc. However, one must carefully examine their asset allocation to reap the maximum benefit from these investments. While equity tends to give some of the highest returns, they are also quite volatile and risky. But going for safer fixed-income or debt instruments cannot help you beat inflation in the long run. This is where hybrid mutual funds come into the picture. But how does it work? If you don't know what a hybrid mutual fund is, this post will explain every bit.

What is Hybrid Mutual Fund and Its Types?

A hybrid mutual fund is a fund scheme that invests in equity and debt instruments to diversify the portfolio and minimise risks. The allocation into different asset classes ensures that the fund's overall performance is balanced with the risk-return adjustment of all instruments.

Aggressive Hybrid Funds

Aggressive hybrid mutual funds in India are a type of open-ended fund with 65% to 80% of its allocation in equity. The rest is invested in debt and other money markets and fixed-income instruments. Over time, these hybrid mutual funds have generated consistently higher returns for investors.

Arbitrage Funds

These hybrid mutual funds primarily profit from capitalising the difference between the price of the cash market and futures markets' prices. The funds buy stocks in the cash market and sell in the futures market with up to 65% of the portfolio invested in equity. The remaining portfolio is invested in debt instruments and money market assets.

Conservative Hybrid Funds

Conservative hybrid mutual funds in India are another type of open-ended scheme. But unlike the aggressive hybrid funds, these funds invest almost 75% to 90% into fixed-income instruments, such as corporate bonds, certificates of deposit (CD), etc. This makes the funds more suitable for risk-averse investors.

Dynamic Asset Allocation Funds

This type of hybrid mutual fund can change its asset allocation in equity and debt dynamically depending on the market volatility. The internal investment model is followed at the fund manager's discretion. So, investors looking to generate better risk-adjusted returns can opt for these hybrid mutual funds in India.

Equity Saving Funds

Equity savings funds of schemes invest primarily in arbitrage, debt, and equity. These funds try to make the most out of the cash and derivative market to generate income for the investors. With a significant exposure in equity, these schemes are perfect for long-term investors looking to generate substantial wealth.

Multi-Asset Allocation Funds

Multi-asset allocation funds must invest at least 10% of their portfolio in three asset classes. The rest can be increased and reduced according to the market conditions. Typically, the instruments in which these funds invest are equity, debt, and gold.


This is a good instrument to spread your risk. Hybrid funds invest in multiple asset classes like equity, debt, gold, etc. Depending on your risk appetite, you can choose the hybrid fund that suits you the best.

Now that you understand hybrid mutual funds and their types, you can explore the various funds available on Fi Money. We offer completely commission-free mutual fund investments via our highly intuitive user interface. Plus, there are more than 800 direct mutual funds available on Fi. To simplify the investment process, Fi allows you to invest in Mutual Funds daily, weekly, or monthly using automatic payments or Systematic Investment Plans (SIPs) that can be created with just one screen tap. Additionally, Fi offers complete flexibility with no penalties for missed payments. It follows the guidance of epiFi Wealth, a SEBI-registered investment advisor and tries to simplify investment for first-timers. So, start your investing journey today with Fi Money.

Frequently Asked Questions

1. What are hybrid mutual funds also known as?

Hybrid mutual funds are also known as asset allocation funds since they can help better asset allocation. The hybrid mutual funds in India have multiple purposes, allowing investors to reap the benefits of equity and debt from a single scheme.

2. What is an example of hybrid funds?

Balanced funds are a common example of hybrid mutual funds in India. These schemes invest about 60% in equity and 40% in fixed-income assets, such as debts and bonds.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
Share this article
Copied Link!
Hybrid Mutual Funds - Definition, Types and Benefits


View similar articles in
Get the Fi app