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Mutual funds offer investors a variety of investment options, each designed to cater to different risk appetites and financial goals. Among these, aggressive hybrid funds have gained popularity due to their ability to balance growth Read more..and stability.These funds invest primarily in equities while maintaining a portion of their portfolio in debt instruments. This dual approach allows investors to benefit from the potential returns of equities while mitigating risks through the stability offered by fixed-income securities.
Aggressive hybrid funds are suitable for investors who seek capital appreciation but want to limit their exposure to stock market volatility. With professional fund management and a structured asset allocation approach, these funds aim to deliver optimised returns over the medium to long term.
This article explores aggressive hybrid funds in detail, including how they work, their features, advantages, risks, and tax implications. Read less
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Name
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AUM
|
1Y Returns
|
|
|---|---|---|---|
ICICI Pru Equity & Debt Fund - (G) Hybrid|Aggressive Hybrid Fund Buy |
₹42339.69 cr. | 10.60% | |
|
ICICI Pru Equity & Debt Fund - (IDCW-A) Hybrid|Aggressive Hybrid Fund Buy |
₹42339.69 cr. | 10.61% | |
|
ICICI Pru Equity & Debt Fund - (IDCW-A) - Reinvestment Hybrid|Aggressive Hybrid Fund Buy |
₹42339.69 cr. | 10.61% | |
|
Tata Hybrid Equity Fund - Regular (IDCW) - Reinvestment Hybrid|Aggressive Hybrid Fund Buy |
₹4011.97 cr. | -2.96% | |
|
Tata Hybrid Equity Fund - Regular (IDCW-M) Hybrid|Aggressive Hybrid Fund Buy |
₹4011.97 cr. | 4.89% | |
|
Tata Hybrid Equity Fund - Regular (IDCW-M) Hybrid|Aggressive Hybrid Fund Buy |
₹4011.97 cr. | 4.89% | |
|
Tata Hybrid Equity Fund - Regular (IDCW) Hybrid|Aggressive Hybrid Fund Buy |
₹4011.97 cr. | -2.96% | |
|
Aditya Birla SL Equity Hybrid '95 Fund (G) Hybrid|Aggressive Hybrid Fund Buy |
₹7318.68 cr. | 8.02% | |
|
Aditya Birla SL Equity Hybrid '95 Fund (IDCW) - Payout Hybrid|Aggressive Hybrid Fund Buy |
₹7318.68 cr. | 7.92% | |
|
SBI Equity Hybrid Fund (IDCW) Hybrid|Aggressive Hybrid Fund Buy |
₹74035.64 cr. | 12.45% |
An aggressive hybrid fund is a type of hybrid mutual fund that maintains a higher allocation towards equity while holding a smaller percentage in debt instruments. According to the Securities and Exchange Board of India, aggressive hybrid funds must invest 65 to 80 percent of their corpus in equity and equity-related instruments, while the remaining 20 to 35 percent is allocated to debt securities.
This asset allocation makes aggressive hybrid funds more growth-oriented than balanced hybrid funds, which limit their equity exposure to 40 to 60 percent. Since these funds invest predominantly in equities, they are treated as equity-oriented funds for taxation purposes.
Aggressive hybrid funds are designed to provide higher returns than debt funds while being relatively less volatile than pure equity funds. By incorporating fixed-income securities, these funds help cushion the impact of market downturns while ensuring steady capital appreciation.
Aggressive hybrid funds function by maintaining a strategic balance between equity and debt investments. The majority of the corpus is allocated to equity, allowing investors to benefit from market growth. The debt component acts as a stabilising factor, ensuring that the portfolio remains protected against extreme market fluctuations.
The fund manager plays a crucial role in deciding the equity-to-debt ratio within the prescribed limits. In bullish markets, fund managers may increase equity allocation within the set limits to capitalise on stock rallies. Conversely, during bearish market conditions, they may shift a portion of assets to debt instruments to reduce risk and preserve capital.
Additionally, some aggressive hybrid funds utilise arbitrage strategies, where they take advantage of price differences in different markets to generate additional returns. This approach helps optimise portfolio performance while keeping risks under control.
High equity exposure - Aggressive hybrid funds invest 65 to 80 percent of their total assets in equity and equity-linked securities. This ensures that investors benefit from potential long-term capital appreciation.
Debt allocation for risk management - A minimum of 20 percent of the corpus is allocated to debt instruments, such as government securities, corporate bonds, and money market instruments. This allocation provides a buffer against stock market volatility.
Tax efficiency - Since aggressive hybrid funds maintain more than 65 percent equity exposure, they are taxed as equity funds, which is beneficial for investors in terms of capital gains taxation.
Actively managed portfolio - These funds are managed by professional fund managers who continuously analyse market trends and rebalance the portfolio based on economic conditions. This active management approach ensures that the fund remains optimised for long-term returns.
Suitable for medium- to long-term investors - Aggressive hybrid funds are best suited for investors with a medium- to long-term investment horizon of at least three to five years. The equity component provides growth, while the debt component helps in risk mitigation.
Equity-dominant aggressive hybrid funds - These funds allocate closer to 80 percent in equities, with a minimal portion in debt. They are suitable for investors who seek high returns and can tolerate volatility.
Balanced aggressive hybrid funds - These funds maintain a more balanced approach, keeping their equity allocation around 65 to 70 percent while holding a significant proportion in debt for stability.
Arbitrage-oriented aggressive hybrid funds - Some aggressive hybrid funds integrate arbitrage strategies, taking advantage of pricing inefficiencies in the stock market to generate additional returns.
Aggressive hybrid funds are well-suited for investors with a moderate to high-risk appetite who want to participate in the stock market while maintaining some level of stability. These funds are ideal for investors seeking capital appreciation with controlled risk through debt exposure, beginners in equity markets who want exposure to stocks but with lower volatility, individuals with long-term financial goals such as buying a home, funding education, or retirement planning, and investors looking for a diversified portfolio with both equity and debt assets.
Investing in an aggressive hybrid fund through Bajaj Broking is a simple and seamless process. Follow these steps to begin your investment journey.
Step 1: Log in or open a Bajaj Broking account - Visit the Bajaj Broking website or download the Bajaj Broking app from the Play Store or App Store. If you are a new user, complete the KYC process by submitting your PAN card, Aadhaar, and address proof. The verification process is quick and ensures compliance with regulatory guidelines.
Step 2: Explore aggressive hybrid funds - Once your account is set up, navigate to the mutual funds section and search for aggressive hybrid funds. Compare different fund options based on key parameters such as historical performance, risk levels, fund manager expertise, and expense ratios. Bajaj Broking provides tools such as a mutual fund return calculator to help you assess potential earnings and make an informed decision.
Step 3: Choose your investment mode and amount - Decide whether you want to invest through a lump sum investment or a systematic investment plan. A lump sum investment allows you to invest a fixed amount at once, which may be beneficial when the market is experiencing a correction. A systematic investment plan enables you to invest small amounts at regular intervals, reducing the risk of market volatility and benefiting from rupee cost averaging. SIPs typically start from ₹500 per month, making them accessible for all types of investors.
Step 4: Complete the payment and confirm your investment - After selecting the fund and investment mode, proceed to complete your investment. Choose from payment options such as UPI, net banking, or auto-debit for SIPs. Confirm the transaction to finalise your investment in the selected aggressive hybrid fund.
Step 5: Track and manage your investment - Once you have invested, monitor the performance of your aggressive hybrid fund regularly through the Bajaj Broking app or website. Reviewing your portfolio periodically helps you stay updated on market trends and make adjustments if needed. Staying invested for the long term is recommended to optimise potential returns while balancing risk.
Aggressive hybrid funds provide a unique balance between equity and debt investments, making them an attractive choice for investors seeking growth with controlled risk. These funds offer several advantages, which make them suitable for medium- to long-term investment goals.
Higher Growth Potential - Since aggressive hybrid funds allocate 65 to 80 percent of their assets to equities, they offer the potential for higher returns compared to pure debt funds. The equity exposure allows investors to benefit from stock market appreciation while still maintaining a level of risk control through debt investments.
Lower Volatility than Pure Equity Funds - While aggressive hybrid funds are primarily equity-focused, their allocation to debt instruments, ranging from 20 to 35 percent, provides stability. This makes them less volatile than pure equity funds, offering investors a smoother investment experience, especially during market downturns.
Flexibility in Asset Allocation - Fund managers have the flexibility to rebalance the portfolio within the prescribed limits based on market conditions. In a bullish market, they can increase equity exposure to maximise gains, while in bearish phases, they can shift a portion of assets to debt securities to lower risk. This dynamic approach ensures that the fund is optimised for both growth and capital preservation.
Tax Efficiency - Since aggressive hybrid funds maintain an equity exposure of at least 65 percent, they are categorised as equity-oriented funds for taxation purposes. This classification allows investors to benefit from lower tax rates on long-term capital gains, making these funds a more tax-efficient option compared to debt funds.
Ideal for Long-Term Wealth Creation - Aggressive hybrid funds are well-suited for investors with a medium- to long-term investment horizon, typically three to five years or more. The combination of equity-driven growth and debt-backed stability makes them a compelling choice for financial planning goals such as wealth accumulation, home ownership, and retirement planning.
While aggressive hybrid funds offer a balanced approach, they still come with risks that investors should consider before investing.
Risk Tolerance - Before investing in aggressive hybrid funds, investors should assess their risk tolerance. Since these funds have a significant allocation to equities, they carry inherent market risks. Investors who cannot withstand short-term fluctuations may find them less suitable.
Investment Horizon - Aggressive hybrid funds work best for investors with a medium- to long-term investment horizon, typically three to five years or more. A longer holding period allows investors to ride out market volatility and benefit from the compounding effect.
Fund Manager’s Track Record - The performance of an aggressive hybrid fund depends on the expertise of the fund manager. Investors should review the fund manager’s experience, past performance, and investment strategy before making a decision. A skilled manager can optimise the fund’s asset allocation to maximise returns while mitigating risks.
Expense Ratio - Since these funds are actively managed, they come with an expense ratio that affects overall returns. A higher expense ratio can reduce profits, so investors should compare different funds and choose those with competitive cost structures.
Portfolio Composition - Investors should analyse the composition of the fund’s portfolio, including the proportion of large-cap, mid-cap, and small-cap stocks, as well as the quality of debt securities held. A well-diversified fund reduces exposure to sector-specific risks and enhances overall stability.
Aggressive hybrid funds are treated as equity-oriented funds for taxation purposes. This classification makes them more tax-efficient compared to debt funds, as they follow the standard tax rules for equity mutual funds.
Short-Term Capital Gains (STCG) - If an investor sells units of an aggressive hybrid fund within one year of purchase, the gains are classified as short-term capital gains. These gains are taxed at a flat rate of 15 percent, irrespective of the investor’s income tax slab.
Long-Term Capital Gains (LTCG) - For investments held for more than one year, long-term capital gains taxation applies. Gains up to ₹1 lakh in a financial year are tax-free, while gains exceeding ₹1 lakh are taxed at 10 percent without indexation benefits.
Dividend Taxation - If an investor receives dividends from an aggressive hybrid fund, these are added to their total taxable income and taxed according to their applicable income tax slab. Additionally, a 10 percent tax deducted at source (TDS) is applicable on dividends exceeding ₹5,000 in a financial year.
Aggressive hybrid funds are offered by various asset management companies, each with its own investment strategy. Below is a list of some well-known aggressive hybrid funds in India.
Fund Name | AUM (₹ Crores) | CAGR 3Y (%) | Expense Ratio (%) | CAGR 5Y (%) |
Bank of India Mid & Small Cap Equity & Debt Fund | 1,053.73 | 17.73 | 0.84 | 27.75 |
JM Aggressive Hybrid Fund | 762.93 | 22.73 | 0.66 | 25.59 |
Quant Absolute Fund | 2,115.36 | 14.15 | 0.72 | 24.72 |
ICICI Pru Equity & Debt Fund | 40,089.04 | 18.81 | 0.98 | 22.00 |
Mahindra Manulife Aggressive Hybrid Fund | 1,522.49 | 16.76 | 0.48 | 20.99 |
Bank of India Mid & Small Cap Equity & Debt Fund
The Bank of India Mid & Small Cap Equity & Debt Fund maintains a well-diversified portfolio, with significant exposure to mid-cap and small-cap equities alongside debt instruments. With an AUM of ₹1,053.73 crore, it has delivered a 3-year CAGR of 17.73 percent and a 5-year CAGR of 27.75 percent.
JM Aggressive Hybrid Fund
JM Aggressive Hybrid Fund has an AUM of ₹762.93 crore and follows an aggressive approach to capital appreciation by investing in a mix of equities and fixed-income securities. The fund has shown a strong performance, delivering a 3-year CAGR of 22.73 percent and a 5-year CAGR of 25.59 percent.
Quant Absolute Fund
Quant Absolute Fund manages assets worth ₹2,115.36 crore and aims to provide investors with a stable yet high-growth investment avenue. The fund has recorded a 3-year CAGR of 14.15 percent and a 5-year CAGR of 24.72 percent, making it a competitive choice in the aggressive hybrid category.
ICICI Pru Equity & Debt Fund
With an AUM of ₹40,089.04 crore, ICICI Pru Equity & Debt Fund is one of the largest funds in this category. The fund follows a disciplined investment approach, balancing risk and return effectively. It has delivered a 3-year CAGR of 18.81 percent and a 5-year CAGR of 22 percent.
Mahindra Manulife Aggressive Hybrid Fund
Mahindra Manulife Aggressive Hybrid Fund focuses on achieving long-term capital appreciation while managing downside risks. It has an AUM of ₹1,522.49 crore and has achieved a 3-year CAGR of 16.76 percent and a 5-year CAGR of 20.99 percent. The fund's low expense ratio of 0.48 percent makes it a cost-effective option for investors.
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Aggressive hybrid funds may not be suitable for investors with a low-risk appetite as they have significant equity exposure, ranging from 65 to 80 percent. While the debt portion provides some stability, these funds remain volatile. Investors preferring lower risk should consider balanced hybrid funds or debt-oriented funds instead.
Aggressive hybrid funds carry moderate to high risk due to their primary allocation to equities. Their performance depends on stock market movements, interest rate fluctuations, and economic conditions. While they are less risky than pure equity funds, they remain vulnerable to volatility, making them unsuitable for investors who prefer capital protection.
These funds are suitable for investors with a medium to high-risk tolerance who seek long-term capital appreciation. They are ideal for individuals looking to balance risk and reward, beginners in equity investments, and those aiming to achieve financial goals such as wealth creation, home buying, or funding higher education.
Some of the well-known funds in this category include the Bank of India Mid & Small Cap Equity & Debt Fund, JM Aggressive Hybrid Fund, ICICI Prudential Equity & Debt Fund, and Quant Absolute Fund.
Aggressive hybrid funds can be a good investment option for long-term investors looking for a mix of equity growth and debt stability. They provide higher return potential than debt funds while being less volatile than pure equity funds. However, they require patience and a minimum investment horizon of three to five years.
The expected returns of aggressive hybrid funds depend on market conditions and asset allocation. Historically, they have delivered annualised returns of around 12 to 20 percent over five years. However, returns are not guaranteed and may fluctuate based on stock market performance, interest rate changes, and economic cycles.
Aggressive hybrid funds come with market risk due to equity exposure, debt risk from low-quality securities, and interest rate risk affecting bond valuations. Fund management risk exists if the manager makes poor allocation decisions. Additionally, higher expense ratios can reduce returns, making cost-efficient fund selection essential for investors.
Aggressive hybrid funds follow equity mutual fund taxation rules. Short-term capital gains from investments held for less than a year are taxed at 15 percent. Long-term capital gains above ₹1 lakh are taxed at 10 percent. Dividend income is added to taxable income and taxed according to the investor’s income slab.
The investment amount depends on financial goals and risk tolerance. Most funds allow a lump sum investment starting at ₹5,000, while systematic investment plans begin at ₹500 per month. Investors should consider their long-term objectives, diversify their portfolio, and assess risk factors before deciding on an investment amount.
Mutual Fund Categories |
|---|
| Debt Funds |
| Equity Funds |
| Hybrid Funds |
| Solution Oriented Funds |
Mutual Fund Sub Category |
|---|
| Large Cap |
| Mid Cap |
| Small Cap |
| Arbitrage |
| Aggressive Hybrid |
| Banking and PSU |
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