Aggressive Hybrid Mutual Funds: Top Performing Aggressive Hybrid Fund in India

Aggressive Hybrid funds are a class of mutual funds that invest in both equities and debt securities. These funds focus a major part of their investments in equities with some allocation to debt securities as well. 

Now that you know what an aggressive fund is, scroll down to see the list!

List of 10 Best Aggressive Hybrid Mutual Funds in India

Also Read: Benefits of Investing in Mutual Funds in India

What is an Aggressive Hybrid Mutual Fund?

Aggressive hybrid funds are a type of open-ended hybrid scheme which invests 65% to 80% of its corpus in equity and other equity-related instruments and the remaining 20% to 35% in debt instruments. While equity investment brings significant returns to the portfolio, the impact of market volatility is also high.

Aggressive funds are not as risky an investment option as pure equity funds. This is because they have a small percentage of debt funds that are meant to absorb the shock of market-related risks. However, they do not give as high returns as equity funds. 

Also Read: Hybrid Mutual Funds: Meaning, Types, Benefits, Returns & Taxation

How Do Aggressive Mutual Funds Work?

As aggressive funds invest in both equity and debt, they aim to provide the best of both asset classes. Equity as an asset class can deliver favourable returns and produce wealth for investors over time. Debt, on the other hand, brings stability and reliable revenue. 

The aggressiveness of a portfolio depends on the relative weight of asset classes, including stocks and commodities within the portfolio. For example, portfolio A has invested 80% of its corpus in equity instruments and 20% in debt instruments. On the other hand, portfolio B has invested 65% in equity and 35% in debt funds. Out of the two fund’s portfolios, A is more aggressive, i.e., it has a higher chance of generating better returns but carries higher risk. 

When the stock market is doing well, the aggressive hybrid fund‘s equity portion helps generate returns. Whereas, when the market is doing poorly, the tables can turn around. 

You can invest in aggressive hybrid funds through the SIP route or the lump sum route. 

Also Read: Top Performing Hybrid Mutual Funds in 2022

Reasons to Consider Investing in Aggressive Mutual Funds?

• Diversification- These funds have diverse investments across asset classes that ensure that the investments are not solely dependent on only one asset class.
• Portfolio Rebalancing- The main benefit of aggressive funds is that they must rebalance their portfolios to maintain their asset allocation within the SEBI-mandated range. When markets are performing well, the value of equity holdings increase, and the allocation mix gets titled in favour of equity. So, the fund manager sells stocks to some extent to buy debt instruments to restore the balance.  
• Relatively less Volatile- If you compare aggressive funds to pure equity funds, you will notice that they are relatively less volatile. Only the portion which is invested in stocks will be impacted by market volatility. However, the portfolio’s debt portion would soften the impact.

Read More: Aggressive Hybrid Mutual Funds: Top Performing Aggressive Hybrid Fund in India

Taxability of Aggressive Hybrid Mutual Funds 

As aggressive hybrid funds have over 65% allocation in equities, it is treated like equity funds for taxation purposes. 

If the investor redeems the fund units within a year, capital gains are recognised as short-term capital gains (STCG) and are subject to a 15% tax. However, if the investor holds onto the fund units for more than a year, it will be considered long-term capital gains (LTCG). 

In the case of LTCG, the first Rs. 1 lakh in gains is tax-free in a financial year. However, gains over Rs. 1 lakh are subject to a 10% tax.

Furthermore, an investor’s income will be increased by dividend gains received from these funds, which will then be taxed in accordance with the investor’s income tax bracket. TDS is applicable if the dividend payouts exceed Rs. 5,000.

Also Read: When Is the Best Time to Start Investing in Mutual Funds?

Things You Should Consider Before Investing in Aggressive Mutual Funds 

• Risk factor- Compared to pure equities mutual funds, aggressive hybrid funds carry less risk of loss of capital. These are equity oriented investments and carry moderate to high-risk levels. Further, the debt part of their portfolio is also prone to interest rate risk and credit risk.
• Investment goal- These funds are suitable for medium-term financial goals, such as saving money for a car purchase or vacation. If you have a time horizon of 5-7 years and are not afraid of short-term market fluctuations, you can invest in these funds. As they have a major allocation to equity, they require a moderate to long-term horizon to realise full potential.
• Expense ratio- Aggressive hybrid funds charge an annual fee that investors need to pay to the fund house for its fund management services. A higher expense ratio reduces the fund’s profitability. Make sure you choose a fund that has a low expense ratio but gives a higher return. 
• Return potential- In a rising market, these products will not perform as good as pure equity funds. This is because your invested money is split between equity and debt securities. Moreover, aggressive hybrid funds do not guarantee returns, despite debt investments. 

Read More: Best Retirement Funds – Top Mutual Fund for Retirement in India

Final Word

Aggressive hybrid funds will suit your investment needs if you are willing to take high risks to get high returns. You will also need to have a long-term investment horizon because the longer you keep your investments in the market, the more the returns will be. 

FAQS about aggressive mutual funds