What are aggressive hybrid mutual funds? Which are the top performing aggressive hybrid funds in last 1 year?

The aggressive hybrid mutual funds is a hybrid mutual fund category that can be opted for by investors seeking a balance of safety as well as market exposure over at least five years. As per AMFI guidelines, aggressive hybrid equity mutual funds invest 65-80 per cent in equity and equity-related securities, while the remaining 20-35 per cent is parked in debt and money market securities.

Who should invest in aggressive hybrid mutual funds?

Typically, aggressive hybrid mutual funds should be lapped up by investors with mid-to-high risk appetite who aim to create wealth through steady capital appreciation over a comparably longer term. Indeed, first-time investors in mutual funds can consider investing in these funds that provide exposure to both markets as well as stability to one’s portfolio. Also, investors should specifically look for funds that have a higher exposure to large-cap stocks than mid-cap companies, which tend to be more volatile.

V.L.A. Ambala, a Research Analyst (SEBI Registered), Co-founder - Stock Market Today (SMT) said, “Aggressive hybrid funds are a popular investment instrument that mandates parking at least 65-80% of assets into stocks and 20-35% in debt. This balanced approach to allocation enables investors to diversify their portfolios and cushion the impact of market volatility. This trait makes the fund more suitable for first-time equity investors and those seeking to accumulate wealth without exposing their portfolios to high risks. It is also suited for those comfortable with automated rebalancing of their portfolios as it automatically adjusts asset allocation between debt and equity based on market momentum."

However, individuals must note that these funds generate lower returns than equity funds but are taxed similarly. In the last five years, aggressive hybrid funds have delivered returns in double digits, making them a lucrative investment option. At present, I recommend assessing a fund’s consistency and performance to ascertain how it would align with one’s investment goals and risk-taking capacity, he added.

Advantages of these funds

Such fund schemes allow investors to limit their mutual fund scheme exposure, such that as and when the equity allocation becomes more than 65-75 per cent, the fund manager is obligated to reduce it, thus facilitating auto allocation.

Taxation of aggressive hybrid mutual funds:

These funds for taxation are considered as equity schemes and hence more tax efficient. If held for less than one year, then STCG at the rate of 15 per cent will apply, while if the units are held for over a year, then gains up to Rs 1 lakh attract no tax. The gains over Rs 1 lakh are taxed at 10 per cent.

Best Aggressive Hybrid mutual funds over the last one year