All You Need To Know About Hybrid Funds!

There are different types of investors.

- 

Some investors believe in taking risks and, as a result, they prefer investing inequities. Their reasoning is that the more the risk you take, the more returns you get and hence, equity becomes their first choice. Another type of investor is someone who believes more in the safety of capital, rather than in higher returns. These investors usually invest in safer instruments and try to lower the risk as much as possible.

Generally, they invest in debt instruments. However, some people are often confused as they are afraid of losses in equities and do not appreciate the stable returns provided by the debt instruments. Here step in the hybrid funds that invest in both equity as well as debt. Historically, there was no categorization of hybrid funds. The fund houses used to create hybrid funds of their choice by tweaking the proportion of both the asset classes as they deem fit. However, the situation changed when the Securities and Exchange Board of India (SEBI) came up with its circular for rationalization and recategorization of mutual funds. SEBI created five broad categories of funds, of which hybrid fund is one. Hybrid funds are further categorized and each sub-category of hybrid funds is defined. We will understand these sub-categories in a while.