Investing wisely is similar to navigating a complex maze, and choosing the right investment option is essential. Aggressive hybrid funds offer a versatile and balanced choice for those seeking a blend of growth and stability.
In a nutshell, aggressive hybrid funds combine the best of both worlds: equities and debt. They are designed to offer investors a balanced portfolio that can weather the storms of market volatility while aiming for substantial growth.
In this article, we will explore aggressive hybrid funds, providing you with insights into the best options for 2024. We will explore the criteria for selecting the ideal equity hybrid fund, analyze its past performances, and guide you toward making informed investment decisions.
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Understanding Aggressive Hybrid Funds
Aggressive Hybrid Funds are a special breed of mutual funds. They blend the attributes of equity and debt instruments, offering investors a diversified portfolio within a single investment vehicle. These funds aim to strike a balance between wealth accumulation and risk mitigation.
Hybrid Funds Investment Strategy
Aggressive Hybrid Funds follow a well-thought-out investment strategy. They allocate a significant portion of their assets, often around 65-80%, to equities. This equity exposure allows the fund to benefit from the growth potential of stocks.
The remaining portion, roughly 20-35%, is allocated to debt securities. This debt component lends stability to the portfolio, generating a regular income stream while cushioning against volatility.
Risk-Return on Aggressive Hybrid Funds
Aggressive Hybrid Funds are designed for investors seeking a middle ground between risk and reward. The equity component offers the potential for capital appreciation, which can be especially lucrative during bullish market phases. Simultaneously, the debt component provides stability and income generation, reducing the overall risk associated with equities.
While these funds are less volatile compared to pure equity funds, they are not entirely immune to market fluctuations. The risk-return profile is moderate, and investors should be prepared for occasional fluctuations in NAV (Net Asset Value).
Factors to Evaluate while Selecting the Best Aggressive Hybrid Funds
When venturing into the world of aggressive hybrid funds, one must consider several key factors to make well-informed decisions.
The following factors help in evaluating the suitability of a fund for its unique financial goals and risk tolerance:
Importance of Past Performance
Past performance can be a valuable indicator of a fund’s competence. Assess how it has been managed over various market cycles. Consistency in delivering returns, especially during a bearish market, is a positive sign.
Keep an eye on the fund’s expense ratio, as it directly impacts your returns. Lower expense ratios mean more of your investment is working for you. While aggressive hybrid funds have reasonable expense ratios corresponding to actively managed equity funds. It is still essential to compare and choose cost-efficient options.
Assessing the risk associated with different aggressive hybrid funds is crucial for aligning your investments with your risk tolerance. Factors like the equity-debt ratio, the credit quality of debt holdings, and the sectors in which the equity component is invested can influence the risk profile.
Analyze the fund’s historical volatility, measured by standard deviation. Funds with a lower standard deviation tend to be less volatile. This metric gives you an idea of the fund’s stability over time.
Aggressive Hybrid Funds to Invest in 2024
Here are the top 5 aggressive hybrid funds to invest in 2024, as per Moneycontrol that should form part of your portfolio (as on 25 September 2024):
Canara Robeco Equity Hybrid Fund
Canara Robeco Equity Hybrid Fund, part of the aggressive hybrid fund, is approaching a significant milestone, nearing its thirty-year mark since its establishment.
Over its extensive history, this fund has consistently showcased impressive performance among equity-oriented hybrid funds. The fund has ₹ 8,987.47 crores of assets invested, with an expense ratio of 1.75%. Since its inception, it has given an annualized return of 15.72%.
Even during demanding market conditions, it has upheld a robust track record of providing favorable returns and instilling a sense of stability among its investors.
Quant Absolute Fund
Quant Absolute Fund is a dynamically managed fund with a relatively modest size within the aggressive hybrid fund, characterized by its bold investment approaches. This fund has ₹1,335.08 crores of assets invested with an expense ratio of 2.1%. It has given a 16.74% annualized return to its investors since its inception.
Despite its smaller stature, this fund has demonstrated exceptional performance, delivering substantial rewards to its investors. This fund has consistently secured top positions in return rankings across various time frames.
HDFC Hybrid Equity Fund
The HDFC Hybrid Equity Fund is a renowned aggressive hybrid fund that invests in both equities and debt instruments. The fund uses robust risk management strategies to navigate market fluctuations. This fund has ₹ 20,788.64 crores of assets with an expense ratio of 1.71%. Since its inception, the fund has given an annualized return of 12.95%.
It is worth noting that the fund faced challenges in keeping up with benchmark indices and several peers from 2018 to early 2020. However, the HDFC Hybrid Equity Fund staged a remarkable recovery as the market embarked on an upward trajectory.
ICICI Prudential Equity & Debt Fund
ICICI Prudential Equity & Debt Fund has managed to maintain an impressive track record. Although it has consistently performed in the aggressive hybrid fund category over long periods, it has faced challenges in shorter timeframes. This fund has ₹ 25,274.57 crores of assets under investment, with an expense ratio of 1.69%. This fund has given annualized returns of 14.96% since its inception.
The fund has provided the investors with attractive returns as per the risks taken, indicating its excellence in terms of long-term risk-adjusted performance.
Mirae Asset Hybrid Equity Fund
The Mirae Asset Hybrid Equity Fund is a thoughtfully managed offering within the aggressive hybrid fund category. Since its inception, it has displayed robust growth and rapidly established an impressive track record.
The fund has ₹ 7,721.76 crores of assets under investment, with an expense ratio of 1.74% and it has given annualized returns of 11.85% since its inception.
Navigating the world of investments requires a judicious blend of growth and stability, and aggressive hybrid funds offer just that. These funds strike a balance between equities and debt, making them versatile instruments in your investment portfolio.
Understanding their dynamics, considering past performance, analyzing expense ratios, and evaluating risk profiles are essential steps in selecting the right aggressive hybrid fund for your financial goals.
For those looking to invest smartly in 2024, we have explored some top picks in the aggressive hybrid fund category. These funds have showcased resilience and consistency in delivering favorable returns over the years.
For tailored investment advice and personalized insights, consider signing up with Koshex, your trusted partner in making informed investment decisions.
Frequently Asked Questions (FAQs)
Q1.How can I assess the risk associated with Aggressive Hybrid Funds?
Ans. Assessing the risk associated with aggressive hybrid funds involves evaluating various factors, including the equity-debt allocation, the credit quality of debt holdings, and the sectors in which the equity component is invested.
Additionally, analyzing historical volatility, often measured by standard deviation, can provide insights into the fund’s stability over time.
Q2. Is past performance the only factor to consider when selecting these funds?
Ans. While past performance is an essential factor to consider when selecting aggressive hybrid funds, it should not be the sole criterion. It is crucial to assess other factors such as expense ratios, risk profiles, and the fund manager’s expertise.
Past performance provides historical context, but a comprehensive evaluation should consider multiple aspects to make an informed investment decision.
Q3. Can Aggressive Hybrid Funds Provide Stable Returns?
Ans. Aggressive Hybrid Funds are designed to provide a balance between growth and stability. They are less volatile compared to pure equity funds but are not entirely immune to market downturns. However, their diversified portfolios and allocation to debt instruments help provide relative stability compared to pure equity funds, making them suitable for investors looking for stability.