When it comes to mutual fund scheme returns, aggressive hybrid funds have delivered a return of 3.38% in the past one year as a category, in the past three years — their average return was 14.90%, and 9.78%in the past five years, as per the recent MorningStar data.
Aggressive hybrid funds or equity-oriented hybrid funds are a category of mutual funds that invest primarily in two asset classes: equity and debt. These funds can have maximum exposure in equity up to 75% with at least 25% allocation to fixed deposit (FD)-like instruments.
Considering that aggressive hybrid funds are comparatively less risky than pure equity funds, they remain ideal for risk-averse investors or rank beginners in investment. The debt part ensures that in times of market corrections, the investment value does not dip as much as pure equity funds.
Also, these mutual funds have the potential to offer similar returns as equity funds in the long term. Therefore, it is also suitable for investors with a moderate to long-term investment time horizon, which could be within three-five years.
Aggressive hybrid mutual funds are also suitable for retirees who wish to build a retirement corpus.
A higher expense ratio could eat into the profits of the fund. So, when it comes to selecting a fund for investment, opt for a mutual fund scheme with a lower expense ratio. For instance, opting for direct plans of the fund may provide higher returns than the regular plan due to a lower expense ratio.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.