Aggressive Hybrid Funds Plan

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Aggressivehybrid funds fall in the category of hybrid schemes. These take exposure to both debt and equity securities in proportions specified in the scheme’s investment objective. As compared to plain vanilla balanced funds, these funds have differences in asset allocation. In case of balanced hybrid funds, the fund manager is not allowed to take advantage of arbitrage opportunities. In arbitrage, he/she buys securities at a low price in one stock exchange and sells them at a higher prices in the other. Gains accrue as a result of the price differential of the same security in different market.

The autonomy and choice of investment options available to aggressive hybrid funds is much higher than balanced hybrid funds. Aggressive hybrid funds enjoy the flexibility to take advantage of arbitrage opportunities available in the market. These funds have to allocate at least 20% of fund assets towards debt instruments. The investment in equity and equity related instruments varies between 40% to 60% of fund’s assets. The manner of stock selection varies from growth to value. Similarly, selection of debt securities differ from being highly sensitive to low interest rate sensitive.

Who should invest in Aggressive Hybrid Funds?

These funds aim at generating current income along with wealth accumulation over the long-term via a hybrid portfolio composition. These funds may be perceived as yielding higher returns at a relatively higher risk than standalone balanced hybrid funds. The fund manager attempts to provide consistent returns by investing primarily in equity and a small portion in debt and money market instruments. Such funds are best suited to investors who have a moderate risk appetite and medium-term investment horizon of at least 5 years to 7 years.

The budding investors who are new to volatility associated with the stock market may give these funds a try. Even within the same category, the level of risk among funds may vary depending upon the presence of mid-cap and small-cap stocks. However, while picking funds for investing, use analyse both quantitative and qualitative aspects of the fund.




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