Balanced and Hybrid Funds: Get meaning, Difference and List of funds

Created : December 14, 2020 Author : Deepika Khude Category : Samco account help & support, Basics of stock market, Everything about Investing

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What are Balanced and Hybrid Funds?

Balanced and hybrid mutual funds invest in both, equity and debt, to create a balanced portfolio. When you invest in hybrid and balanced funds, you get dual benefit of:

Growth from the equity portion &
Capital protection from the debt portion.

Hybrid and balanced mutual funds are the best investment option for beginners and conservative investors with a moderate risk appetite.

Today we will learn:

What are hybrid mutual funds?
What is the difference between balanced and hybrid mutual funds?
What are the types of hybrid mutual funds?
How are hybrid funds taxed?
Which is the best type of hybrid funds in India?
Which are the 5 best hybrid funds in India for 2021?

1. What are Hybrid mutual funds?

Hybrid mutual funds are a type of open ended mutual fund which invests in both equity and debt. Hybrid mutual funds are ideal for conservative investors looking for moderate returns. The NAVs of hybrid and balanced funds are comparatively less volatile to pure equity funds.

2. What is the difference between balanced and hybrid mutual funds?

Prior to 2017, there was no clear difference between balanced and hybrid funds. But post SEBI re-categorisation, balanced and hybrid funds were separated with distinct investment mandates and mutual funds are allowed to offer either an Aggressive Hybrid fund or Balanced fund, not both.

3. What are the types of hybrid mutual fund schemes?

There are 6 types of hybrid mutual fund schemes in India, each with a distinct investment mandate.

Type of Hybrid Fund	Equity Allocation	Debt Allocation
Conservative Hybrid Fund	10% - 25%	90% - 25%
Balanced Hybrid Fund	40% - 60%	60% - 40%
Aggressive Hybrid Fund	65% - 80%	35% - 20%
Dynamic Asset Allocation / Balanced Advantage Fund	Invests Dynamically	Invests Dynamically
Multi-Asset Allocation Fund	The scheme will invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes	The scheme will invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes
Arbitrage Fund	The scheme will follow an arbitrage strategy and maintain a minimum 65% in Equity.	The scheme will follow an arbitrage strategy and maintain a minimum 65% in Equity.
Equity Savings	Minimum 65%	Minimum 10%

4. How are hybrid funds taxed?

Hybrid mutual funds are taxed as below:

Tax on equity-oriented hybrid funds:

If redeemed within 12 months a 15% short term capital gains tax is applicable
If redeemed after 12 months, a 10% long term capital gains tax above Rs 1 lakh is applicable.

Tax on debt-oriented hybrid funds:

If redeemed within 36 months, the gains will be added to your tax slab and taxed accordingly.
If redeemed after 36 months, taxed at 20% with indexation.

5. Which is the best type of hybrid funds in India?

Type of Hybrid Fund	Equity Allocation	Debt Allocation	Suitable for
Conservative Hybrid Fund	10% - 25%	90% - 25%	Conservative Low-risk investors
Balanced Hybrid Fund	40% - 60%	60% - 40%	Moderately Conservative Investor
Aggressive Hybrid Fund	65% - 80%	35% - 20%	Aggressive Investor
Dynamic Asset Allocation / Balanced Advantage Fund	Invests Dynamically	Invests Dynamically	Moderately Aggressive Investor
Multi-Asset Allocation Fund	The scheme will invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes	The scheme will invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes	Moderately Aggressive Investor
Arbitrage Fund	The scheme will follow an arbitrage strategy and maintain a minimum 65% in Equity.	The scheme will follow an arbitrage strategy and maintain a minimum 65% in Equity.	Aggressive Investor
Equity Savings	Minimum 65%	Minimum 10%	Moderately Aggressive Investor

6. Which are the 5 best hybrid funds in India for 2021?

Best Hybrid Mutual Funds in India	Assets Under Management	Risk Profile
EDELWEISS BALANCED ADVANTAGE FUND - GROWTH OPTION	1923.53 Cr	Medium - High
CANARA ROBECO EQUITY HYBRID FUND REGULAR GROWTH	3906.04 Cr	Medium - High
MOTILAL OSWAL EQUITY HYBRID FUND-REGULAR PLAN GROWTH	375.16 Cr	Medium - High
UNION BALANCED ADVANTAGE FUND REGULAR PLAN - GROWTH	554.84 Cr	Medium - High
TATA BALANCED ADVANTAGE FUND REGULAR PLAN GROWTH	1263.93 Cr	Medium - High

** The above ranking is as on 16th December 2020. To check the latest data and ranking of all mutual funds click here.

Final Thoughts:

Balanced and hybrid funds are a great investment option for beginners, conservative low-risk investors and retirees as it gives them the best of both the worlds. However, hybrid funds are not risk-free. For example, aggressive hybrid funds invest 65%-80% in equity and carry very high risks. Whereas conservative hybrid funds invest upto 90% in debt and are low risk. You might be a conservative investor investing in an aggressive hybrid fund! Therefore selecting between the various types of hybrid funds is very important. To avoid such a situation, Samco’s mutual fund investing platform, RankMF has created a unique SmartSwitch facility which helps you switch out of poor performing funds and switch in to top performing mutual funds. To access this SmartSwitch facility, open a Samco Demat and trading account and get FREE access to RankMF’s SmartSwitch facility. So, invest in the best hybrid funds in India for 2021 using the best mutual fund research and investing platform in India - RankMF.