Understanding aggressive hybrid mutual funds, An aggressive hybrid fund is a type of mutual fund mandated to invest in a mix of equity (stocks) and debt. According to SEBI norms, these schemes are required to allocate 65-80% of their funds in stocks and 20-35% in debt. This diversified portfolio is designed to handle market volatility effectively, as the debt portion can cushion the impact during turbulent equity market conditions. This feature makes aggressive hybrid funds an attractive investment option, particularly for conservative equity investors seeking long-term wealth creation with manageable risks.

Understanding Conservative Equity Investors

Before delving deeper into aggressive hybrid funds, it’s essential to grasp the concept of conservative equity investors. They differ from conservative investors who avoid risks altogether and opt for safer instruments like bank deposits and bonds, providing predictable returns. On the other hand, conservative equity investors are willing to take some risk but seek to minimize overall volatility in their investment portfolio. Their main objective is to grow wealth steadily while protecting their investments from excessive market fluctuations.

The Advantages of Aggressive Hybrid Funds

Investing in aggressive hybrid funds offers several advantages that make them a compelling option for investors:

1. Diversified Portfolio

The most prominent advantage of aggressive hybrid funds is their mixed portfolio of equity and debt. This blend helps maintain the asset allocation by facilitating regular profit bookings, which, over time, enhance the returns. During bullish market conditions, if the equity allocation exceeds the planned level, the fund manager can sell some stocks to rebalance the portfolio.

2. Tax Efficiency

Compared to individual investors, mutual funds have a tax advantage. When investors book profits in their personal portfolio, they may incur taxes. However, mutual funds are not liable to pay taxes on their gains, enabling investors to maximize their returns.

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Points to Consider Before Investing

Before making a decision to invest in aggressive hybrid funds, it’s crucial to keep the following points in mind:

1. Volatility Control and Wealth Creation

Aggressive hybrid funds can help investors limit volatility and create wealth over the long term. The mixed portfolio of these schemes acts as a buffer during market downturns, reducing the overall impact on investments.

2. Profit-Booking Strategy

Regular profit bookings by fund managers contribute to boosting the overall returns of aggressive hybrid funds. This strategy is especially effective during bullish phases, ensuring that the portfolio remains balanced and aligned with the investment objectives.

3. Tax Implications

While aggressive hybrid funds offer tax efficiency, investors should be aware of their own tax implications. Depending on individual circumstances, it’s essential to consider the tax aspect while making investment decisions.

4. Dividends and Regular Income

Investors should not rely solely on regular dividends from aggressive hybrid funds to meet their regular income needs. The primary objective of these funds is long-term wealth creation, and dividends may not be consistent throughout market cycles.

Understanding the Risk

Despite the benefits, it’s vital to understand that aggressive hybrid schemes are not risk-free. With a minimum of 65% investment in stocks, they inherently carry market risks. Investors must be prepared for short-term volatility, as stocks can be subject to fluctuations.

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Recommended Aggressive Hybrid Funds for 2023

Based on our research and performance analysis, we recommend the following aggressive hybrid funds for investment in 2023.

• SBI Equity Hybrid Fund
• Canara Robeco Equity Hybrid Fund
• Mirae Asset Hybrid Equity Fund
• ICICI Prudential Equity and Debt Fund
• Quant Absolute Fund

Our Methodology for Choosing Funds

We employ a comprehensive approach to shortlisting the best hybrid mutual fund schemes. Our methodology includes the following parameters.

• Rolled daily for the last three years
• Hurst Exponent (H) calculation to assess consistency and volatility
• Negative returns analysis
• Jensen’s Alpha measurement for risk-adjusted returns
• Benchmark comparison and active return evaluation

Aggressive hybrid funds present a balanced and efficient investment option for those seeking wealth creation with manageable risks. By maintaining a mixed portfolio of equity and debt, these funds can withstand market fluctuations and enhance overall returns. However, investors should be aware of the inherent risks associated with investing in equity-based schemes.