CAFS Hybrid funds

Hybrid Funds



    Hybrid Funds

    Hybrid fund consist of bot debt and equity funds. They have high return factor of equity as well as the safety factor of debt in one place. Investor who are in-between and want to utilise both can opt for hybrid funds

    Equity funds are investments made on private companies. They further invest the borrowed money in the firm capital for profits. From the profits they give back dividends to the investors.

    Debt funds consist of loans given to private and government firms. The borrowers return the principal after a promised amount of maturity period. In-between they also provide regular interest for the amount borrowed.

    Who should you buy Hybrid funds?

    Hybrid funds are suitable for investors who look for safe as well as risky investments. It consists of different ratios of such factors. These funds gain advantage from the rate of interest as well as the market gains on equity. Investors who don’t want to stick with single advantage of equity or debt can opt for hybrid funds.

    As discussed, above hybrid funds are further classified for different risk profiles which differ in terms of market risk and returns. Investors has to choose accordingly.

    Aggressive funds consist more of equity and has high possibility of gaining high returns at the same time have high risk factor.

    Conservative funds consist more of debt and has high possibility of safe and fixed returns. These funds are volatile like other hybrid funds.

    Facts to be considered

    Hybrid instruments are generally opting by investors who have certain amount of knowledge about both equity and debt. Below are few factors to be considered before choosing a hybrid funds.

     

    Sector

    Investing in private and public sector are two different things with unique performances. The private sector is always knowns for higher returns and higher risks. Whereas in government sector the returns are comparatively low but they are safely backed by the government.

     

    Nature of fund

    As described above decided the equity debt fund ratio is the first thing a investor has to do before investing in hybrid fund. As each fund is unique it’s advisable for the investor to know the portfolio ratio before investing.

     

    Past performance

    Past performance is a considerable factor before choosing any fund. A fund should have a stable return. Also note that having both gains and few loses is not a bad sign. The investor has to analyse such things before investing.

     

    Portfolio

    Even though the equity debt fund ratio is decided it’s vital to know where the money is to be invested. It’s up to the investor to go with a particular fund and its portfolio. The investor has to analyse the fund portfolio before investing.