Investor for the first time can feel overwhelming, especially with many available options. Hybrid mutual funds offer a balanced approach, making them an ideal choice for newcomers. They expose equity and debt markets, allowing for diversified growth with moderate risk.
Here’s a closer look at why hybrid funds can be a starting point for beginners and how they work.
What Are Hybrid Mutual Funds?
Hybrid mutual funds allocate investments across both equity and debt instruments, offering a blend of growth potential and stability.
By mixing different asset classes, these funds aim to deliver higher returns than pure debt funds but with less volatility than pure equity funds. This approach helps balance risk while still participating in market growth.
In FY24, the hybrid fund category in India saw notable growth as more first-time investors opted for this diversified option. According to AMFI, hybrid funds attracted inflows of approximately ₹17,436 crore by the end of Q1 FY25, reflecting growing trust in this category.
Why Should You Invest in Hybrid Mutual Funds?
Apart from helping you thoroughly calculate your risk and safe returns, hybrid funds are better for investing for the following reasons.
Strong Inflows and Growing Popularity
Hybrid funds have become increasingly popular. The increase in assets was accompanied by an increase in the number of investors, with folios reaching 1.35 crore in March 2024 from 1.21 crore the previous year, adding 14 lakh investors.
This surge follows the 2023 change in debt fund taxation, which eliminated the indexation benefit for debt funds held over three years, prompting investors to explore alternatives in hybrid funds for their tax efficiency and balanced portfolio options.
Diversification and Flexibility
Hybrid funds come in various sub-categories, from aggressive hybrid funds (allocating up to 80% in equities) to conservative funds with heavier debt allocations, offering options suited to different risk tolerances. This diversification appeals to investors seeking stability and growth.
Multi-asset allocation hybrid funds, which spread investments across equities, bonds, and sometimes gold, have been particularly popular, receiving inflows of over ₹33,054 crore in FY24.
It helps investors reduce the overall risk and optimize returns.
Asset Growth and Market Confidence
The overall assets under management (AUM) for hybrid funds reached ₹7.2 lakh crore by March 2024, up from ₹4.8 lakh crore the previous year—a 51% increase. Such growth reflects investor confidence and satisfaction with hybrid funds’ returns and risk profile.
For new investors, this popularity signals a well-trusted investment option with consistent returns. Additionally, mutual funds cumulative AUM across India reached an all-time high of ₹53.4 trillion in FY24, further suggesting a robust, growing market for first-time investors.
Potential Returns Amid Volatility
In a year marked by market volatility, hybrid funds have outperformed many other categories due to their asset flexibility. By allowing fund managers to adjust allocations based on market trends, these funds offered stable returns even as equities fluctuated.
This adaptability is particularly beneficial for first-time investors who prefer steady, predictable growth over higher, volatile gains. Multi-asset and balanced advantage funds have especially seen strong traction, catering to investors looking for both security and moderate growth.
Conclusion
With their structured asset allocation and risk management, hybrid mutual funds provide a solid, accessible foundation for those starting in the investment space. The diverse fund options, tax benefits, and growing trust in this segment make it a straightforward choice. For first-time investors looking to enter the market, the best hybrid mutual funds offer a versatile investment vehicle to balance security and growth.