The Mutual Fund Show: Hybrid Schemes Help Offset Global Uncertainties, Growth Concerns
Hybrid funds have diversification across equity, debt, commodities and real estate, say experts.
Hybrid funds comprise a blend of assets such as stocks, gold and bonds. And amid uncertainties such as global conflicts, such schemes could be ideal for investors.
They’re favoured for their inclusion of both stocks and bonds, according to Udayan Adhye, who is involved in finance and investing, social media profile analysis and statistics. “The stocks aid growth, while bonds lend stability,” he said.
“One advantage of hybrid funds is the opportunity to experience the advantages of all these funds. It’s a good way to enter the market due to global uncertainties and growth concerns.”
Pankaj Mathpal, founder and CEO, Optima Money Managers, concurred. Hybrid funds have diversification across equity, debt, commodities and real estate, he said. “Investors can have multiple asset classes in one scheme, depending on the objective of the scheme.”
Mathpal listed the advantages of hybrid funds:
Blend of equity and debt allows better risk management.
Debt instruments provide stability and income.
Appeal to investors looking for mid-rate risk exposure.
Gold and silver offer a hedge against inflation.
Provide a smoother investment experience vs pure equity funds.
Good for investors not comfortable with managing equity and debt portfolio individually.
The positives of such schemes, according to Adhye, are:
Diversification of assets.
Automatic portfolio rebalancing without it being a taxable event.
Smoother returns vs an all-equity portfolio.
In terms of conservative hybrid funds, Mathpal said: “(They’re) treated as debt funds for taxation purposes, and gains are taxable at the slab rate applicable to the investors.”
He recommended multi-asset allocation funds, with his top picks being Quant Multi Asset Allocation Fund and ICICI Pru Multi Asset Fund.
Adhye’s top picks include HDFC Balanced Advantage Fund, ICICI Pru Multi Asset Fund and Edelweiss Balanced Advantage Fund.
What Are Arbitrage Funds?
Arbitrage funds are a popular choice for parking money in the short term. The downside in these funds is very limited, according to Mathpal. Edelweiss Arbitrage Fund and Kotak Arbitrage Fund are his top picks.
Kotak Equity Arbitrage Fund and SBI Arbitrage Opportunities Fund were Adhye's top picks.
Query 1: I'm planning to start Rs 20,000 SIP with a time horizon of seven years in these four funds and increase the investment amount annually. Have I chosen the right funds for my SIPs? Additionally, I'm planning to invest Rs 50,000 as lumpsum. So, should I make the investment post-election?
Quant Small Cap Fund (Direct)
Nippon India Growth
Parag Parikh Flexi Cap
SBI Long-Term Equity Fund
Name: Sahil Dhanani I Age: 25 years
Udayan Adhye: Well-built portfolio in terms of the four funds that you have selected.
Pankaj Mathpal: If he is investing in the SBI fund for the purpose of saving on taxes, he can proceed with it. If not, I would suggest replacing this fund with ICICI Prudential Nifty 50 Index Fund, which offers greater exposure to large-cap stocks. For the other Rs 50,000 investment, ICICI Prudential Large and Midcap Fund would be a good choice. Invest the money in a staggered manner, and no need to wait for after elections.
Query 2: I have around Rs 2.5 crore invested in MF and PMS. I do Rs 10,000 SIPs and add some lumpsum amount whenever there is a dip in the market (average Rs 3 lakh monthly including SIP and lumpsum). I am 48 years old and hope to make my total investment Rs 4 crore in 2 years when I'm 50 for my retirement. My plan is to withdraw 0.5-0.75% monthly from my total investment as SWP for monthly expenses. Additionally, I have taken one PMS called IIFL Multicap PMS, with a growth of approximately 12% in 2 years. Have I chosen the right funds and is the PMS a good idea?
Name: Narayan I Age: 48 years
Pankaj Mathpal: If you expect Rs 4 crore in two years with the money invested, it's not realistic. So, either you have to increase the investment amount or the investment horizon.
Udayan Adhye: If increasing the investment amount or pushing the retirement age is not possible, you can try to decrease the monthly take-out amount post-retirement.
Query 3: My father has a retirement corpus of Rs 25 lakh and wants to invest it in different instruments. Can you guide us?
Name: Sreenivas I Age: 50 years
Udayan Adhye: Take out Rs 5 lakh from the total and keep it in a fixed deposit or arbitrage fund. And the rest of it can be invested in government schemes, hybrid funds, and equity funds.