Can Hybrid Funds Help Investors Achieve Long Term Capital Appreciation?

When you are young and pick up that first salary, it makes you feel empowered. There is something about earning money that makes you want to earn more. However, in most cases the monthly income that people earn isn’t sufficient in helping them achieve their long term financial goals. Hence, anyone who wants to see themselves succeed in wealth creation may have to start investing at an early stage in their life. Those who are new to investment may find it difficult to make the right investment decision. Not because they lack decision making skills, but currently there are a plethora of investment schemes available in the market. Some of these schemes carry similar traits but yet are different in nature. Hence, someone who is new to investing might find it difficult to navigate through these multiple investment vehicles and narrow down to one particular scheme.

Those who are keen on investing are first expected to determine their risk appetite. A risk appetite is nothing but an investor’s ability to take a certain amount of risk with that they are able to receive some seek capital appreciation in future. There are some investors who do not wish to take any chances with their finances. These individuals generally invest in conservative investment tools. However, such schemes offer fixed interest rates that are on the lower side and may not be able to justify your years’ worth of commitment to investment. However, if you are keen on investing in market linked schemes that do not offer fixed interest but give you an opportunity to invest in multiple markets, you may consider investing in hybrid mutual funds.

Hybrid mutual funds are a mutual fund category that invest in both equity and debt classes. They are a bit different than the usual equity and debt mutual funds. If you wish to find out more about hybrid funds, continue reading.

What are hybrid funds?

While equity funds predominantly invest in equity related instruments and debt funds invest majorly in debt assets, Hybrid funds avoid the concentration of risk since these funds invest in both equity and debt related instruments. These funds are considered to be ideal for those who do not wish to give their finances a complete exposure to equities and want to balance risk by investing partially in debt as well.

How can investing in hybrid funds help investors with wealth creation?

Here are some of the ways a hybrid fund may help you with wealth creation:

Hybrid funds are professionally managed

AMCs/fund houses who own hybrid funds generally hire a team of experienced fund manager(s) whose job is to help the scheme achieve its investment objective. It is the duty of the fund manager to implement an investment strategy and buy/sell securities accordingly. Hence even those investors who do not have deep knowledge about hybrid funds because they are usually in the hands of seasoned fund managers with a rich industry experience.

Hybrid funds may help investors with a long term investment horizon

Since hybrid funds invest a certain portion of their assets in equity, they might benefit investors with a long term investment horizon. That’s because investments in equity linked schemes are supposed to offer capital appreciation if one remains invested for the long run. Hence, it is better to invest in a hybrid fund for the long run, especially if you are aiming for long term financial goals like retirement corpus or planning or financially securing their child’s future.

Hybrid funds offer multiple investment options

Those who are seeking investment in hybrid funds have two investment options – they can either make the traditional lumpsum investment or go with the systematic investment plan. A lumpsum investment is something that you make in a hybrid fund right at the beginning of the investment cycle. However, if you want to give your hybrid fund investments a systematic approach, you may start a SIP. A systematic investment plan is an easy and hassle free way to continue investing in hybrid funds from the comfort of your laptop or even a smartphone. SIP allows systematic investments at regular intervals. You may start with a small investment amount and gradually increase the monthly SIP. If you continue investing in hybrid funds via SIP app for the long run you may even benefit from the power of compounding.

These are some of the reasons investing in hybrids may help you with wealth creation. However, investors are expected to understand their risk appetite before investing in hybrid funds. If you are seeking capital appreciation through investment in a hybrid fund you may take a look at Axis Aggressive Hybrid Fund.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.