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What are Aggressive Hybrid Mutual Funds
Aggressive Hybrid Mutual Funds are Hybrid Funds that tend to invest in equity of at least 65%, and the remaining 0-35% of the total assets are invested in debt securities and other money market instruments.
Most Aggressive Hybrid Funds allow autonomy to the fund manager to take advantage of the volatility of the market situations. Thus, the fund managers are able to take advantage of buying a security at a lower price and selling it at a higher price.
Moreover, the fund manager has the liberty to opt to follow the market growth while selecting stocks. Similarly, they also have the option to choose different debt securities of different rates of interest.
How Aggressive Hybrid Funds Work
Aggressive Hybrid Mutual Funds primarily work on the asset allocation principle. As various asset classes bear different risk profiles, diversifying investments in equity and debt assets as per the required proportions helps reduce risk, and simultaneously generate better comparative returns for the investors.
A significant portion of investment in equity funds can result in higher returns, in the long run, making Aggressive Hybrid Funds a good investment. The risk of Equity Funds is balanced with debt investments enabling investors with better returns at reduced risk.
Aggressive Hybrid Mutual Funds are meant to enjoy the flexibility to take advantage of arbitrage opportunities of the market in various situations.
Who Should Invest in Aggressive Hybrid Funds
Aggressive Hybrid Mutual Funds are best suited for investors who like to go for moderate-risk investments with a medium-term horizon of 3-5 years. These funds are capable of yielding better returns at a relatively higher risk when compared to standalone Hybrid Funds.
New investors with less knowledge of the volatility in the markets can plan to invest in Aggressive Hybrid Mutual Funds. New equity investors who are not capable of understanding market risks can opt for these investments.
Moreover, the investors who are near the retirement age can choose this option to help build their retirement corpus.
Therefore, Aggressive Hybrid Mutual Funds are best for investors who have a moderate risk appetite and have planned an investment horizon of at least five years.
Things to Consider Before Investing in Aggressive Hybrid Funds
There are various factors to watch while investing in Aggressive Hybrid Mutual Funds:
- Evaluate for the Risks and the Returns: Asset allocation is the prime factor while investing in Aggressive Hybrid Mutual Funds. Research well how the funds are diversified to help you get the best returns with reduced risks. Remember that Aggressive Hybrid Funds are not as risky as a pure equity asset class. They bear a moderate risk as they consist of a significant equity component.
- Consider your Financial Goals: These funds can be a better option to achieve the medium-term goals of investors. However, it is always good to watch the market conditions to reap good returns as there may be times when the market is bearish, and you have to wait for an extended period over and above your preferred time frame.
- Expense Ratio: Like all other Mutual Funds schemes, investors are also required to pay a fee for the fund management services which is known as the expense ratio. Watch for the schemes that offer less expense ratio as a higher expense ratio will end up eating your profits.
Taxation on Aggressive Hybrid Funds
Aggressive Hybrid Funds are treated as similar to Equity Funds for taxation purposes.
- Long-Term Capital Gains, when the investment is held for more than one year gains above Rs. 1 Lakh are taxed at the rate of 10% without indexation.
- Short-Term Capital Gains, that is capital gains within one year, are taxed at 15%.
How to Invest in Aggressive Hybrid Funds Through Nivesh
Any investor can enjoy the benefits of investing through Nivesh in the following easy steps:
- Create an account in Nivesh by providing your basic KYC details. (If you already have an account then just login into your account)
- On your portfolio page click on the Buy New tab at the right top corner of the screen.
- Select the category and choose the funds you want to purchase.
- If you already know the name of the fund to buy, then you can search the particular fund through Quick Order.
- Fill the transaction details and confirm. You can place up to 5 orders in one go.
- You can make payment through your registered account through UPI, Direct Pay, or NEFT/ RTGS , Bank Mandate or Cheque. For same-day NAV, select UPI, Direct Pay or NEFT / RTGS as other payment options may take a few days to clear, Nodal account takes about 1-2 days to clear payment from the approved mandate and cheque takes about 2-5 days in clearing due to which you will not get the same-day NAV.
Frequently Asked Questions (FAQs)
- Where do Aggressive Hybrid Mutual Funds Invest?
Aggressive Hybrid Funds invest more than 65% of the assets in equity instruments and the rest in debt instruments. A major portion of the investment in Equity Funds provides better chances of getting higher comparative returns in the long run.
- Who Should Invest in Aggressive Hybrid Funds?
Aggressive Hybrid Funds are best suited for investors who want to generate more wealth with low risk. These funds are also good for new investors, Aggressive Hybrid Mutual Funds are able to generate good returns in the long term.
- What is the Lock-in Period for Aggressive Hybrid Funds?
Aggressive Hybrid Funds are an open-ended scheme with no lock-in period as such. However, investors are advised to hold these funds for at least 3-5 years to get better returns.
- What is the Exit Load on Aggressive Hybrid Funds?
These funds charge an exit load of 1% within one year of the investment date.
- How are Aggressive Hybrid Funds Taxed?
Aggressive Hybrid Funds are treated as Equity Funds for taxation purposes. For LTCG (investments for more than one year), the gains up to Rs. 1 Lakh are tax exempted, while if they exceed Rs. 1 Lakh they are taxed at the rate of 10%.
For STCG (Investments for less than one year), these are taxed at the rate of 15%.
