Sujit is a senior government employee who is due to retire in seven years. Her kids are all grown up and will start earning soon. he is gone Investment in large cap share Funds. However, he has heard some market commentary about the current equity market valuation, and this has forced him to consider products with slightly lower risk. He is banking on his mutual fund portfolio for his post retirement financial needs and cannot take any risk with it. He is looking to shift his corpus to a relatively low-risk investment, but is worried that he will sacrifice higher returns if he moves to fixed deposits. He wonders if there is an alternative to high-risk equities mutual funds Given the current market conditions, that would provide much needed growth to their portfolio.


Hybrid Funds are mutual fund schemes which usually Investment in combination with equity and loan securities and sometimes in other asset categories such as gold. NS Aggressive Hybrid funds are mandated to invest 65-80% of their assets in equities and the rest in fixed income. Sujit can value such funds as the markets are at all time highs. They fulfill their objective of reducing risk as well as participating in equity markets without sacrificing increased bargaining. For investors, hybrid funds help to capitalize on investment opportunities in the equity markets, providing stability to the debt markets, which can sustain a portfolio in the event the equity markets correct in the interim.

The importance of asset allocation cannot be overstated in such scenarios where an asset class starts looking risky. Hybrid Fund offers Sujit in a ready-made format only. Due to the good performance of equity, debt in recent times, these funds have attracted the interest of investors. Most of the hybrid fund categories have set or defined asset allocation patterns. They are a good option for evaluating Sujit’s equity (risk) preference. He can also consider Balanced Advantage Funds as they are a mid-path solution. He can use the fund to take appropriate equity exposure with inbuilt mechanism to automatically increase the equity allocation if the market corrects. This makes it ideal for conservative investors like Sujit who are keen on growth from equity investments but are wary of its downside risk.

Conservative investors like Sujit, who tend to panic during sharp market corrections, will certainly find the risk-reward results of hybrid funds more acceptable than pure equities in a scenario where the market has already gone up significantly.

(Content on this page is courtesy of Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Aarti Bhargava and Labh Mehta.)