What is a Hybrid Fund? Will it buy you more Rubies & Diamonds?

5 min readNov 3, 2021


A hybrid fund is an investment fund that is characterized by variability between two or more categories of assets. These funds are often invested in a mix of stocks and bonds. They can also be known as property distribution funds. Hybrid Investments aim to gain wealth awareness time and make money over time with a balanced portfolio. The fund manager allocates your money at different rates on equity and debt depending on the purpose of investing in the fund. The fund manager can buy/sell securities to take advantage of market movements.

Types of Hybrid Funds: Hybrid funds are classified according to their share of assets. Some hybrid funds have a higher revenue share, while others allocate more in terms of debt. Let’s take a closer look:

Equitable Hybrid Funds: If a fund manager invests more than 65% of the fund’s assets equally and all other debt and financial market instruments, then it is called an equity-based fund. Part of the fund’s finances consists of the financial shares of companies in industries such as FMCG, finance, health care, real estate, car, and so on.

Estimated Debt-Based Financing: A hybrid fund is defined as a debt-oriented fund when the fund manager allocates more than 65% of its assets. Part of the debt in the fund creates investments in fixed income areas such as government securities, loans, bonds, treasurer debts, and so on. To raise funds, a % of the funds will be invested in cash and cash equivalents.

Monthly Income Plan Schemes: These are joint ventures that invest heavily in debt. The monthly income plan (MIP) will typically have 15–20% disclosure inequities. This will allow it to produce higher returns than normal credit terms. MIPs provide general income to the investor in the form of shares. Investors can choose from the frequency of interest payments; it can be monthly, quarterly, semi-annually, or annually. MIPs also come with a growth option — allowing investments to grow in the corpus of the fund. Therefore, MIP is not a small monthly income. Don’t let the word mislead you. It is a hybrid investment that is heavily invested in debt and other financial instruments.

Arbitrage Funds: An arbitrage fund manager tries to maximize profits by buying a stock at a lower price in a single market. He then sells at a higher price to another market. However, arbitrage opportunities are not always available immediately. In the absence of arbitrage opportunities, these funds may be attached to credit instruments or cash. By design, arbitrage funds are very secure, like most debt financing. But its long-term profits will be taxed like any other fund.

Who Should Invest in Hybrid Funds? (Understand if it is for you)

Hybrid funds are considered a safer bet than equity funds. This offers higher returns than real loans and is popular with savings investors. Emerging investors who are willing to gain exposure to equity markets can invest in hybrid investments. The presence of equity items in the portfolio provides the potential for high profitability. At the same time, the debt component of the fund provides an incentive to avoid further market downturns.

In this way, you get sustainable benefits instead of the full potential that is possible in the event of pure equity investments. In the category of less savvy investors, the powerful feature of the supply of certain hybrid financial assets becomes a great way to enjoy the best of market volatility. (“Hybrid Mutual Funds — Definition, Types, and Benefits of Hybrid Funds,” 2019).

What an Investor Should Consider Before Investing in a Hybrid Fund

  • Risk factors — it would be naïve to think that hybrid money is completely harmless. Any tool investing in the stock market will have some risk. It can be less risky than pure equity investments, but you need to be careful and review your portfolio regularly and rebalance when required.
  • Protection/Compensation — Hybrid funds do not provide a guaranteed protection or compensation scheme. Basic security performance affects the Net Asset Value (NAV) of these funds. Therefore, it is likely to change due to market movements. In addition, there may not be any profits during market downturns.
  • Fees — Hybrid funds will charge a fee to manage your portfolio, known as a cost estimate. Before investing in a hybrid fund, make sure you pay lower fees than other competing funds, and this translates into a higher return on investment for you — the investor.
  • Investment Horizon — Hybrid fund investments may be suitable for medium-term investment, up to five years.
  • Financial Goals — You can meet medium-term financial goals and retirees can supplement their retirement income for example.


Hybrid joint ventures are a type of joint venture that invests in more than one category usually a combination of equity assets and liabilities and sometimes include gold. The key philosophies behind hybrid finances are asset distribution and diversity. Hybrid funds offer a variety of risk tolerance levels ranging from savings to moderate to aggressive. They serve as a good entry point for new investors in the financial markets and can be used for any particular medium-term goal.


ClearTax. (n.d.). Hybrid Funds: Basics, Types, Benefits & Who Should Invest. Retrieved from ClearTax.in website: https://cleartax.in/s/hybrid-funds

‌What are Hybrid Funds? Types & Benefits of Hybrid Funds? (n.d.). Retrieved October 23, 2021, from ETMONEY website: https://www.etmoney.com/mf/hybrid-mutual-funds

‌Hybrid Mutual Funds — Definition, Types, and Benefits of Hybrid Funds. (2019, November 11). Retrieved from Groww website: https://groww.in/p/hybrid-funds/




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