Best Aggressive Hybrid Mutual Funds to Invest in October 2024

Your favorite mutual fund manager or experts may have told you that hybrid funds are likely to prove their worth next year. Hybrid mutual funds or schemes that invest primarily in equity and debt do better in an uncertain or volatile environment. Mutual fund experts believe that markets are likely to be cautious and investors should also exercise caution.

Aggressive Hybrid Funds They are one of the popular categories of hybrid mutual funds. These schemes are mandated to invest in a mix of equity (or equity) and debt. As per Sebi norms, these schemes must invest 65-80% in equity and 20-35% in debt. This mixed portfolio helps to better cope with market volatility. When the stock market is in crisis, the debt portion of the portfolio softens the blow. This helps new investors continue with their investments without worrying too much about volatility.

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If you are worried about market uncertainties and volatility, you can consider investing in aggressive hybrid mutual funds. Mutual fund advisors often recommend aggressive hybrid fund schemes to “conservative” equity investors to build wealth and achieve their long-term financial goals.

A ‘conservative capital investor’ is not the same as a conservative investor. A conservative investor does not want to take any risk. These investors usually put their money in bank deposits, bonds, etc., which provide them with predictable returns. A conservative stock investor is willing to take risks, but does not want too much risk or volatility. Therefore, a conservative equity investor typically wants to grow their wealth without exposing their investments to too much volatility.

Mixed portfolio

Another advantage of investing in these schemes is their mixed equity and debt portfolio. To maintain the asset allocation, the fund manager will consistently record profits, which will increase returns. Suppose the stock allocation has gone beyond the original plan in a bull market. The fund manager would sell the shares to maintain the allocation. This profit booking, over a long period of time, would improve returns. Sure, you can make such an allocation and create your own mutual fund portfolio. However, when you book profits, you may have to pay tax on profits exceeding Rs 1 lakh in a financial year. A mutual fund, on the other hand, is not required to pay taxes. Again, this would help investors improve their returns. Now that you know about these schemes, here are the points you need to remember before deciding to invest in aggressive hybrid funds. First, the mixed portfolio of these schemes helps you limit volatility and build wealth over a long period. Secondly, regular profit accounting would help these plans increase profits. Third, they offer a tax advantage. Lastly, don’t depend on regular dividends from these plans for regular income.

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However, you should always remember that none of these factors make aggressive hybrid schemes risk-free. Any plan that invests a minimum of 65% in stocks cannot be risk-free. Stocks are risky. Therefore, you should be prepared for some volatility in the short term.

Here’s an update: SBI Equity Hybrid Fund has been in the fourth quartile for the last five months. Mirae Asset Hybrid Equity Fund has been in the third quartile for the last three months. Before that, the plan had been in the fourth quartile. Canara Robeco Equity Hybrid Fund has been in the third quartile for the last 17 months. Please note that these schemes also formed part of our recommendation list in 2023. We have been watching these plans closely. Follow our monthly updates if you are investing in these schemes.

Aggressive hybrid schemes to invest in October 2024:

• SBI Equity Hybrid Fund
• Canara Robeco Equity Hybrid Fund
• Mirae Asset Hybrid Equity Fund
• ICICI Debt and Prudential Capital Fund
• Quantitative absolute fund

Methodology
If you want to invest in these plans, you may be interested in knowing how we choose them. Take a look at our methodology:

ETMutualFunds has employed the following parameters to shortlist the hybrid mutual fund schemes.
1. Average rolling returns: Shot daily for the last three years.

2. Consistency in the last three years: The Hurst exponent, H, is used to calculate the coherence of a background. The H exponent is a measure of the randomness of a fund’s NAV series. Funds with high H tend to exhibit low volatility compared to funds with low H.

i) When H = 0.5, the return series is said to be a geometric Brownian time series. These types of time series are difficult to forecast.

ii) When H is less than 0.5, the series is said to be mean-reverting.

iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger the trend of the series.

3. Risk of falling: For this measure we have only considered the negative returns provided by the mutual fund system.

X = Returns below zero

Y = Sum of all squares of X

Z = Y/number of days needed to calculate the relationship

Downside Risk = Square Root of Z

4. Superior performance
i) Portion of equity: It is measured by Jensen’s Alpha over the last three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). A higher alpha indicates that the portfolio’s performance has exceeded the market’s expected returns.

Average return generated by the MF scheme =

[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[Tasalibrederiesgo+BetadelesquemaMF*{(Rendimientopromediodelíndice-Tasalibrederiesgo}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}

ii) Portion of debt: Fund performance: reference performance. Daily rolling returns are used to calculate the fund and benchmark performance and subsequently the fund’s active performance.

5. Size of assets: For hybrid funds, the threshold asset size is Rs 50 crore.

(Disclaimer: Past performance is no guarantee of future performance.)