Hybrid funds, or Balanced Funds as they used to be known, are a smart choice for investors who seek multi-faceted returns and prefer not being tied to a specific asset class. These funds employ a hybrid approach using multiple assets including debt, equity, gold and even real estate allowing investors to capitalize on different investment options. The purpose of this article is to help you understand the broad categories of hybrid funds, their working, and other factors that you need to consider in choosing the most suitable hybrid fund in India.

 What Are Hybrid Mutual Funds in India?

Hybrid funds are commonly referred to as Mutual Funds that invest in different asset classes. Unlike the regular funds which concentrate their resources in a single asset, hybrid funds cover multiple classes of assets ensuring that investors enjoy a diversified portfolio. Such forms of diversification guarantees low risk while there is maximization of total returns.

A hybrid fund can allocate funds in the following assets:

1. Debt
2. Equity
3. Gold
4. Real estate

The mix of these assets will depend on what an investor decides and how much risk they are willing to take. It is the goal of a hybrid fund to obtain a blend of risk and profit by investing in both equity and debt resources, making the fund stable and growth-oriented.

Types of Hybrid Mutual Funds in India

Hybrid funds are differentiated by the different ratios of equity and debt present. Different proportions of domestic equity and the available debt are adjusted depending on the risk appetite of the fund. Here are the most common types of hybrid funds.

Aggressive Hybrid Funds

Equity allocation: 65% Debt allocation: 35%

Aggressive Hybrid Funds are more suitable for investors who are willing to accept certain risks in exchange of greater returns over a longer time horizon. Unlike their conservative peers, these funds have higher risk due to greater equity exposure and therefore have the ability but are also willing to take on more risk.

Balanced Hybrid Funds

Equity allocation: 40-60%

Debt allocation: Thereevaluation allocates the remaining portion

Moderately aggressive investors love balanced hybrid funds. Balanced hybrids invest in equities and debts enabling value appreciation to a degree of safety.

Conservative Hybrid Funds

Equity allocation: 10-25%

Debt allocation: The remaining portion

Conservative Hybrid Funds allocate very little to equity. These funds suit well as the allocation correlates with low or moderate risk individuals looking for a regular salary.

Equity Savings Hybrid Funds

65% of the equity portion is active. Net equity and net arbitrage are at 20-30% and 70-80%.

Minimum Debt Allocation is at 10%

Equity savings funds have an aggressive risk management strategy and are good for investors with a balanced risk appetite because they provide equity and debt.

Investment Tools Used by Hybrid Mutual Funds

Less risky hybrid funds generally invest in listed companies, which helps to enhance yields. Some of them are given below:

Arbitrage Tools

Arbitrage profit includes opportunities that come with differences between two or more markets. For instance, purchasing and selling of shares with a price difference in two different locations, say market A and Market B where price is lower in market A while higher in market B will give profits.

Dynamic Asset Allocation

Dynamic Asset Allocation is also referred to as DAA, like Profit Target Strategy applies the construct of dividing a fund’s position in multiple school types. When market prices are low, relatively to their moving averages, the fund increases his/her exposure to equity, and attempts to sell out of positions when market prices exceeded their moving averages and are over valued, all of which were lower oil in the other debt instruments. To put it another way, the fund alters the proportions of different assets that make up the fund portfolio in response to shifts in the market.

Multi-Asset Funds

Multi-Asset funds definition implies that a certain fund can invest in multiple assets such as debt securities, equity mutual funds, real estate, silver, gold, and others. It is common for multi-asset funds to comprise debt, equity, gold, and some may even include real estate and silver. In accordance to SEBI, multi-asset funds must comprise a minimum of three primary assets to include equity, debt, gold. The remainder is available for the fund manager’s selection.

How to Choose the Best Hybrid Mutual Funds in India

Unlike other types of funds, hybrid funds require additional thought in how one selects the specific scheme. Investors assess their level of risk and period of investment, among other things.

Risk Appetite

Whenever you choose a hybrid fund, your level of risk tolerance should always factor in when considering hybrid funds:

An investor with a greater degree of risk acceptance should consider aggressive funds which have a higher equity exposure of ≥65%.
Those with lower risk acceptance may consider more balanced conservative hybrid funds.

Investment Duration

Most people new to investing often go for hybrid funds and unit trusts are offering a lot of those funds. This is because investors whose knowledge and confidence are growing are able to raise their portfolio weightage towards equity owing to riskier multi-assets categories like debt and equity.

An aggressive hybrid fund may perform well for long term objectives. However, short term ask goals and less risk appetite investors will benefit more from conservative hybrid funds.

Best Performing Hybrid Mutual Funds in India (2025)

There is an abundance of hybrid mutual funds offered by numerous fund houses in India. Following is the list of some of the top mutual fund houses with hybrid funds.

These fund houses have different types of hybrid mutual funds, each suiting different types of investors and their risk tolerance.

Key Takeaways: Investing in Hybrid Mutual Funds in India

The most important one is clearly investors are free to choose any investment portfolios including gold and real estate, boosting diversification with hybrid funds.

Remember to focus on the fund that best fits your risk tolerance exposure objectives. For example aggressive funds increase exposure goals while conservative funds lower risk tolerance.

Hybrid funds are an excellent option for new investors looking to diversify their portfolio.

Keep in mind the timescale and a particular fund manager’s investment style prior to purchasing a hybrid fund.

After understanding the different types of hybrid funds and their nuances, one is able to make investment decisions that achieve financial objectives and goals while enabling the creation of a diversified portfolio that caters to both growth and security.