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One of the best ways to diversify your investment portfolio is by investing in hybrid mutual funds. Hybrid mutual funds make the process of diversifying your portfolio much easier and simpler.
A hybrid mutual fund invests in both debt and equity-linked instruments. Hybrid funds invest in government and corporate securities, treasury bills, bonds, and stocks to bridge the gap between debt and equity funds. These funds can further be classified based on their equity exposure. Investing in hybrid funds is apt for those who are ready to bear some risk in order to earn higher returns. The risk involved in investing in these funds majorly depends on their exposure to equity instruments.
The primary objective of investing in hybrid funds is to optimise the returns by diversifying the portfolio. The hybrid mutual funds are further sub-categorised based on the risk and investment objectives.
Hybrid funds are mainly classified based on their equity exposure. Following are the types of hybrid mutual funds:
After knowing the classification of hybrid mutual funds, you need to keep the following points in mind while choosing a hybrid mutual fund: