Hybrid mutual funds invest in more than one asset class. Mostly, they are a combination of equity and debt assets, and sometimes they also include gold or real estate.
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In India, more and more people are now developing the habit of investing their money. Nowadays, people invest their money in stock markets, FDs or mutual funds. There are some mutual funds that have been able to give a lot of returns to investors. Earlier, investors also used to enjoy the benefits of indexation along with their investment in mutual funds. The benefits of indexation were given in the form of an additional tax exemption on investment expenses relative to the inflation rate.
But during the budget of 2023, Finance Minister Nirmala Sitharaman announced that those investing in debt mutual funds will no longer be given the benefit of indexation. This changed the attitude of the investors. Now, investors are moving towards hybrid mutual funds.
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As the name suggests, hybrid mutual funds belong to the hybrid category. They are a type of mutual fund that invests in more than one asset class. Mostly, they are a combination of equity and debt assets, and sometimes they also include gold or real estate. For instance, the money put into these mutual funds is invested in both equity and debt assets. This scheme invests some part in equity, i.e., shares, along with government securities and assets like gold and silver.
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Due to this strategy, hybrid mutual funds are able to give higher returns and involve less risk. As the government has also stopped giving the benefits of indexation, people have started compensating for their losses by taking higher returns. As a result, investors have started investing more in hybrid mutual funds.
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According to the figures of the Association Mutual Funds of India (AMFI) in March 2023, i.e., just before the implementation of the new rule, investors had withdrawn Rs 12,372 crore from debt fund schemes. Although the investors heard about the returns from hybrid mutual funds, they started increasing their investments in them. In the six months from April to September, it was found that investors invested around Rs 62,174 crore in the scheme. The month of October saw an investment of Rs 9,907 crore in the hybrid mutual funds. In just seven months, the new scheme of hybrid mutual funds has attracted investments of more than Rs 72,000 crore.
