Why do you Need Aggressive Hybrid Funds in Your Portfolio?


Equity investments give high returns but at the same time, they are very volatile and carry high risk. If you want to take less risk and also want the benefit of equity then an aggressive hybrid fund is the answer. These funds are very good for new investors also.

In this article we will study in detail about aggressive mutual funds and why one should have it in the portfolio.

Why do you Need Aggressive Hybrid Funds in Your Portfolio?

What are Aggressive Hybrid Funds?

Aggressive hybrid funds are the mutual funds that invest in two asset classes i.e. equity and debt. As per regulatory guidelines, aggressive hybrid funds invest 65-80% of their assets in equity and the remaining 20-35% in debt instruments like bonds and money market products.

Equity can give you high returns in the long run. On the other hand, debt investment provides stability and can give you regular income. The aggressive hybrid fund- a combination of equity and debt can offer high returns as well as stability in one single product.

Why Should You Have Aggressive Hybrid Funds in Your Portfolio?

Aggressive hybrid funds are getting popular among investors these days. It is very good for new investors who want to invest in equities. Aggressive hybrid funds offer certain benefits which is why you should have it in your portfolio. Here are some of the major benefits of aggressive hybrid MF.

  • Diversification

These funds give the true benefit of diversification. It invests in both equity and debt and hence your returns are not solely dependent on equity market movement. The debt portion also plays an important role.

  • Automatic Rebalancing

One of the major benefits that hybrid funds offer is that they follow a strict rebalancing process. This keeps the asset allocation within the prescribed limit. The current law says that these funds should have at least 20% invested in debt funds.

Hence if the markets rise the value of equity holdings will also increase and the allocation mix will favour the equity mix. To get the balance as per the law the fund manager can sell the stocks and invest the proceeds in debt instruments.

  • Taxation Benefit

As this mutual fund invests 65% or more in equity so they enjoy equity taxation benefits. The gains on investments sold within 1 year are defined as short-term capital gains and taxed at 15%.

But if you hold an investment for more than a year then sell then the gains are categorised as long-term capital gains. This type of gains up to 1 lakh are tax-free and exceeding 1 lakh are taxed at 10%.

  • Less Risky

Aggressive hybrid funds carry less risk than pure equity funds. The mixture of debt and equity helps to mitigate the market risk and reduces the overall risk. Even if the market falls and equity is affected, the risk would be limited as the debt component would reduce the loss.

  • Simplicity

If you invest in these funds then there is no need to invest in multiple funds to have exposure to different asset classes. The fund manager here takes care of your asset allocation.


Aggressive hybrid funds give you a unique investment opportunity which comprises equity and debt. This reduces your overall risk and gives higher returns in the long run. It also gives tax benefits as a major investment in equity it is taxed as per equity. To invest in mutual funds, consider opening an account with Dhan.