WHAT ARE AGGRESSIVE HYBRID FUNDS?
Aggressive hybrid funds invest between 65% and 80% of their total assets in equities and equity-related instruments, and the remaining 20-35% in debt securities and money market instruments. Since this is intended for conservative investors, most fund managers allocate a larger share of equity to large-cap companies and the debt portion to sovereign or high-rated (AAA) securities.
HOW BIG IS THE FUND CATEGORY?
As on July 31, 2024, the aggressive hybrid fund category manages ₹2.19 lakh crore of assets and has 31 schemes with 5.5 million folios.
WHAT ADVANTAGES DO THESE FUNDS OFFER?
The biggest advantage of these funds is that they offer investors automatic returns. asset allocationThis helps first-time investors and those who do not have a financial advisor or those who do not want to have too many mutual funds in their portfolios. This works well for do-it-yourself investors or those who do not want a distributor or a financial planner. In this category, whenever the equity allocation goes beyond the 65-75% limit, the fund manager is forced to reduce the equity allocation and move to debt and vice versa, which helps in automatic allocation.
WHAT IS THE TAX TREATMENT FOR AGGRESSIVE HYBRID FUNDS?
The biggest advantage of aggressive hybrid funds is that you get allocation to debt and equity. tax treatment is that equity fundsFor schemes held for more than a year, long-term capital gains tax of more than ₹1.25 lakh in a year is levied at 12.5%, while for holding periods of less than a year, short-term capital gains tax is levied at 20%. Thus, an investor in high tax brackets gets exposure to fixed income and ultimately pays lower tax.
WHO SHOULD CONSIDER AGGRESSIVE HYBRID FUNDS?
Financial planners believe that conservative investors who are switching from fixed-income products to mutual funds for the first time and are considering an automatic asset allocation product can consider such funds. Investors should opt for schemes with a track record of higher allocations to large-cap stocks as such companies are well-established and have a long track record. Investors with a moderate risk tolerance and a high risk-tolerance should opt for such funds. investment horizon of at least five years can consider these funds and stagger their investments using a systematic investment plan (SIP).
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