How to Invest in a Hybrid Fund?

Investing in mutual funds has now become easy. Gone are the days where investors had to manually fill out forms and submit hard photocopies of their official documents. Investors had to manually travel to the fund house or the asset management company and submit these forms to make an investment in mutual funds. Thanks to the advent in technology, investing now has become a lot easier.

Of the many mutual fund schemes out there, hybrid funds have a unique investment strategy. While equity funds invest predominantly in equity and equity related instruments and debt funds invest in fixed income securities, hybrid funds invest in both equity and debt related instruments.

You can invest a minimum investment amount in mutual funds. This minimum investment amount differs from mutual fund to mutual fund and from one Asset Management Company to another. There are multiple ways to invest in hybrid funds.

The first way to invest is to make a one time lump sum payment. Investors can pay the entire investment amount right at the beginning of the investment cycle. One good thing about lumpsum investment is that investors are allotted units in large quantities in accordance with the investment amount and depending on the fund’s existing net asset value (NAV). If the NAV is low at the time of the purchase, investors will be allotted more units. Similarly, if the NAV of the fund is high at the time of lumpsum investment, investors will be allotted lesser units. However, one good thing about lumpsum investment is that investors are allotted more units because they are paying a large amount at once. But there’s a drawback to this as well. When you make a lump sum investment in hybrid funds, you are exposing your entire investment amount to the vagaries of the market. If the market crashes, there is a good chance of you losing your portfolio incurring major losses.

Investors can avoid exposing their entire investment amount to the dangers of unpredictable equity markets by starting a SIP in hybrid funds. A Systematic Investment Plan, abbreviated as SIP is an easy and unique way to make hassle free investments at systematic intervals at periodic intervals. One does not need to have a large amount at their disposal to make investments in hybrid funds through SIP. Investors can choose a small amount that they are comfortable with investing on a monthly basis. However, this small amount has to comply with the minimum investment amount mentioned in the offer document of the hybrid scheme.

Here are some of the reasons SIP investments in hybrid funds are far better and convenient:

Invest from the comfort of your home

Remember we said that you do not need to go to the fund house manually to make an investment in mutual funds, which applies to SIP investors as well. All you need to have is a laptop or a smartphone with a decent internet connection and you can invest in hybrid funds via SIP from almost anywhere in the world. You are just a few clicks away from making an investment in hybrid funds via SIP. No need to personally visit the fund house or fill any manual forms. Everything has gone digital these days and investing in hybrid funds has become a lot easier. However, if you want to go to the old school way and do not wish to make digital investments, you can still make manual SIP investments in the traditional way.

Achieve long term goals

Generally, there is an expiry date for SIP investments. You are free to continue investing in hybrid funds via SIP till your investment objective is achieved. And if you are investing in an aggressive hybrid fund that allocates a majority of its assets to equity related instruments, it is better that you keep a long term investment horizon. Because equity related instruments only tend to perform as per expectations when one remains invested for the long run. So if you have long term financial goals like building a retirement corpus or planning for your children’s future, you should remain invested in hybrid funds via SIP for the long run. Also, those who continue investing via SIP stand a chance of benefiting from the power of compounding. Compounding has the power of multiplying small investment amounts in a large corpus. It is the interest derived from the interest which is derived from the initial investment. Now do understand that investment is a long journey and if you want to benefit from the power of compounding, then you need to remain invested for at least 10 years and above.

Now that you know how to invest in a hybrid fund and if you are looking forward to making an investment, you can take a look at some of the hybrid funds offered by Axis Mutual Funds. If you feel that you are not able to make a decision as to which hybrid fund to invest in, it is better that you consult your financial advisor first.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.