How to Give a Balanced Approach To Your Investing?
How to Give a Balanced Approach To Your Investing?
Stock markets are scaling new highs, yet corrections and global uncertainties continue to interrupt the bull run. Therefore, as an investor, you need to adopt a balanced approach. An ideal portfolio must combine growth with stability. This protective approach ensures that you don’t just build wealth, but also protect it.
One of the smartest ways to adopt this controlled aggression in the stock market is to blend equity and debt effectively. Thatâs when you must invest in hybrid funds. In this blog, we have discussed what hybrid funds are and how they help you balance your approach to investing.
Table of contents
Why Investors Shouldnât Bank Solely on Equity?
Firstly, letâs understand why investors shouldnât build their entire portfolio in equity.
Equity Delivers Growth, but Comes With Volatility
Equity mutual funds continue to be the preferred investment avenue to generate long-term wealth. However, equity markets can be highly volatile. Going 100% into equities might not always be the best move, particularly if you have a low risk tolerance.
Fixed-Income Assets Offer a Safety Net
Debt instruments, like bonds and treasury bills, can significantly absorb shocks when markets are turbulent. These fixed-income instruments bring the much-needed stability to your portfolio. In the process, they protect your capital. So, your returns are not entirely at the mercy of the stock market.
The Role of Hybrid Mutual Funds in a Balanced Portfolio
So, how can investors strike a seamless balance between risk and return? The answer lies in hybrid mutual funds.
Hybrid mutual funds strategically balance their assets between equity and debt instruments. They are designed to offer the growth potential of equities and the stability of debt funds. Some aggressive hybrid funds have returned as much as 24% to investors in the last five years.
As per the Association of Mutual Funds in India, the asset base of these funds witnessed a 12% Y-o-Y growth, rising to INR 2.26 lakh crore in April 2025.
The hybrid mutual fund is a broad category. Depending on the risk profiles, investors can choose from three types of hybrid funds.
- Conservative Hybrid Funds
Typically, conservative hybrid funds invest around 75% to 80% of their assets in debt instruments and the remaining in equities. The SBI Conservative Hybrid Fund is a popular option in this category. It offers a relatively stable return while adding an equity element to your portfolio for long-term gains.
- Aggressive Hybrid Funds
Aggressive hybrid funds invest up to 75% in equities and the rest in debt. If you have a higher risk appetite but still want some cushion against market downturns, aggressive hybrid funds can be the ideal pick for you.
- Balanced Advantage Funds
Also known as dynamic asset allocation funds, balanced funds are managed more actively. The fund manager adjusts the equity-debt mix according to the valuations in the market. Investors, therefore, get a variable exposure to both equity and debt instruments while maintaining controlled risk.
The beauty of hybrid mutual funds lies in asset allocation. Suppose equities are becoming overvalued. Some hybrid funds will reduce exposure and move assets to safer debt instruments.
Likewise, during a market dip, the fund manager may increase equity exposure to capitalize on undervalued opportunities. This flexibility helps investors stay invested across market cycles without constantly tweaking their portfolio.
Conclusion
Whether youâre just getting started in the money market or have a conservative approach, investing in mutual funds is exciting, but unpredictable. A balanced approach of investing in a hybrid fund that juggles equity and debt proportion as per market conditions can be beneficial here. Build a portfolio with the right balance that can help you achieve your financial goals with confidence.
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