Mutual funds have emerged as one of the most popular investment vehicles in India over the past few years. It’s an attractive option for people who lack the expertise and resources to invest directly in stocks and bonds. One of the most significant advantages of mutual funds is that they offer diversification, professional management, and liquidity. In this article, we will explore hybrid mutual funds, which are becoming increasingly popular in India, and also highlight the best ELSS funds.
What are Hybrid Mutual Funds?
The hybrid mutual fund is a combination of equity and debt. These funds offer investors the benefits of both equity and debt. Mutual funds allocate a part of their assets to equities and a part of their assets to debt instruments. The equity component of these funds provides the potential for capital appreciation, while the debt component provides a steady income.
The allocation of assets in hybrid mutual funds varies according to the fund’s investment objective and the market conditions. However, their equity component typically ranges between 65% and 80%, while the debt component is between 20% and 35%.
Hybrid mutual funds offer investors the benefit of diversification. By investing in both equities and debt, these funds are less volatile than equity funds. Furthermore, investors can choose from various types of hybrid funds, such as aggressive hybrid funds, balanced hybrid funds, conservative hybrid funds, and dynamic asset allocation funds.
Best ELSS funds in India
ELSS stands for Equity-linked Savings Scheme. This mutual fund is designed to help investors save tax under Section 80C of the Income Tax Act, 1961, while providing the potential for capital appreciation. ELSS funds have a lock-in period of three years, and investors can invest up to INR 1.5 lakhs per year.
Here are some of the best ELSS funds in India:
1. Aditya Birla Sun Life Tax Relief 96 Fund – This fund has consistently outperformed its benchmark for the past ten years, and it has generated an average return of 14.08% over the last five years.
2. Axis Long Term Equity Fund – This fund has a diversified portfolio, consisting of 40-50 stocks that are a mix of large, mid, and small-cap companies. It has generated an average return of 15.4% over the last five years.
3. Mirae Asset Tax Saver Fund – This fund has a large-cap bias, with 70-75% of its portfolio invested in large-cap stocks. It has generated an average return of 20.68% over the last five years.
Invest with Confidence: Navigating the World of Mutual Funds
Investing in mutual funds can be a daunting task, especially with so many options available in the market. Therefore, it’s crucial to consider several factors before investing in hybrid mutual funds or ELSS funds.
1. Investment objective – Before investing in a mutual fund, investors should consider their investment objective and risk tolerance. For instance, investors with a moderate risk appetite may consider investing in a balanced hybrid fund, while investors with a low-risk appetite may choose a conservative hybrid fund.
2. Evaluation of fund house – It’s essential to evaluate the fund house based on the manager’s experience and the fund’s track record. This will help investors gauge the fund’s performance and minimize the risk of investing blindly.
3. Investment horizon – Investors must also determine their investment horizon before investing in a mutual fund. Long-term investors may consider investing in equity funds, while those with a short-term investment horizon may prefer debt funds.
In conclusion, investing in mutual funds in India can be an effective way to earn returns, save tax, and achieve financial goals. Hybrid mutual funds are becoming increasingly popular in India, offering investors the benefits of both equity and debt. Best ELSS funds can help investors save tax while providing the potential for capital appreciation.
Before investing in mutual funds, investors must evaluate their investment objectives, risk tolerance, and investment horizon. Moreover, they must consider several factors such as the fund house’s track record and the fund manager’s experience to minimize the risk of investing blindly.
Investors must also keep in mind that trading in the Indian financial market involves risk, and it’s crucial to gauge all the pros and cons of investing before making any investment decisions. It is always advisable to consult with a financial advisor before investing in any investment vehicle.
Disclaimer: All the information provided in this article is for educational purposes only. The article is not intended to provide any investment advice. The reader must gauge all the pros and cons of trading in the Indian financial market before making any investment decisions.
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