Why Aggressive Hybrid Funds are ideal for beginners or conservative investors : The best way for small investors to invest in the stock market is to invest in mutual funds – this is generally advised to retail investors. But the question arises that in which type of fund should a retail investor invest? If we are talking about getting attractive returns by investing money in the stock market, then the first thing that comes into focus is equity funds. But investors who do not want to take much risk, should they also invest in equity funds only or can there be some other better option before them? Aggressive Hybrid Mutual Funds can be considered as the answer to this question. Being a hybrid fund, investing in them involves less risk than equity funds, while investing a large portion in equity also makes it possible to earn attractive market-based returns. This is the reason why aggressive hybrid funds are considered better for conservative investors and new investors.
What are aggressive hybrid funds?
According to SEBI definition, 65 to 80 percent of the assets of aggressive hybrid funds are invested in equity and equity related instruments, while 20 to 35 percent of the assets are invested in debt instruments. Equity investment provides better returns, while debt investment acts as a cushion during market downturns and protects the portfolio from falling too much. This better mix of debt and equity also provides mental relief to new and conservative investors during market fluctuations. This is the reason why for such investors, aggressive hybrid funds are considered better than pure equity funds.
Aggressive hybrid funds also invest in arbitrage. Fund managers investing in arbitrage buy the same shares at a lower price in one stock exchange and sell them at a higher price in another exchange. In this way they earn profits by taking advantage of the difference in share prices in two stock exchanges. Margin is not high in this, but the risk is also very low.
Last 5 Year Returns of Top Aggressive Hybrid Funds
The country’s top aggressive hybrid funds have given excellent returns in the last 5 years. The special thing is that being hybrid funds, their performance has been comparatively better even during the market decline.
Quant Absolute Fund
Average Annual Return (Regular) in 5 years: 24.89%
Average annual return (direct) in 5 years: 26.32%
Asset Under Management (AUM): Rs 2,008.51 crore
Bank of India Mid & Small Cap Equity & Debt Fund
Average Annual Return (Regular) in 5 years: 22.49%
Average annual return (direct) in 5 years: 23.63%
Asset Under Management (AUM): Rs 719.95 crore
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ICICI Prudential Equity & Debt Fund
Average annual return (regular) in 5 years: 20.89%
Average annual return (direct) in 5 years: 21.54%
Asset Under Management (AUM): Rs 34,528.62 crore
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JM Aggressive Hybrid Fund
Average annual return (regular) in 5 years: 19.94%
Average annual return (direct) in 5 years: 21.16%
Asset Under Management (AUM): Rs 267.50 crore
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Edelweiss Aggressive Hybrid Fund
Average annual return (regular) in 5 years: 17.14%
Average annual return (direct) in 5 years: 19.24%
Asset Under Management (AUM): Rs 1,571.71 crore
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Baroda BNP Paribas Aggressive Hybrid Fund
Average annual return (regular) in 5 years: 16.97%
Average annual return (direct) in 5 years: 18.92%
Asset Under Management (AUM): Rs 1,019.37 crore
(Source: AMFI, all figures updated till 8 May 2024)
