Hybrid funds offer a substantial sense of reassurance as against investing in equity markets due to the latter's high volatility even though they are high wealth generators. And this is especially reassuring for new or early entrants into the mutual fund sector.

For instance, a combination of equity, fixed income, and gold in certain cases, can essentially get you a risk profile, which is probably much more stable.

Industry experts Bhavesh Jain, Co-head of Hybrid & Solutions at Edelweiss Mutual Fund, and Dinesh Balachandran, Fund Manager – Equity at SBI Mutual Fund in CNBC-TV18's Smart Money explain why investors should consider them as valuable additions to their portfolios.

Equities have long been recognised as potent wealth generators over the long term, often outperforming other asset classes. Nevertheless, the inherent volatility of equity markets, highlighted by periodic drawdowns, can deter even the most seasoned investors.

Balachandran elaborates on this concept, emphasising how hybrid funds provide a sense of comfort, particularly for newcomers to the mutual fund landscape. “In COVID, you suddenly saw a big drawdown in equities, and a lot of people got scared and this is where a hybrid fund come into the picture, where the thought process is that through a combination of equity, fixed income, and gold in certain cases, you essentially get to a risk profile, which is probably much more stable compared to investing in 100 percent equity fund.”

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For those who are new to the world of mutual funds, there is a substantial sense of reassurance. Ultimately, the risk assessment, gauged by drawdowns or corrections, tends to remain relatively moderate within hybrid funds. This accomplishment is the result of a strategic fusion involving investments in equities, fixed income, and occasionally, gold.

Jain highlighted the spectrum of hybrid funds available in the market. These encompass a range of options catering to distinct risk profiles and investment objectives. From arbitrage funds, equity saving funds, and multi-asset allocation funds to balanced advantage funds, conservative hybrid funds, and aggressive hybrid funds, the hybrid category offers a diverse array of strategies to align with various investor needs.

First Published:Aug 4, 2023 5:00 PM IST