Table of Content:
Introduction
3 Reasons to Invest in Aggressive Hybrid Funds
Balance Between Equity and Debt
Potential for Higher Returns
Tax Efficiency
Conclusion: Why Choose Aggressive Hybrid Funds?
Introduction
Investing in mutual funds is a popular choice for individuals looking to grow their wealth over time. Among the various types of mutual funds available, aggressive hybrid funds have gained attention for their unique characteristics and potential benefits. In this article, we will explore three compelling reasons why investing in aggressive hybrid funds can be a wise decision for investors.
3 Reasons to Invest in Aggressive Hybrid Funds
1. Balance Between Equity and Debt
One of the primary reasons to consider investing in aggressive hybrid funds is the balance they offer between equity and debt. These funds allocate a significant portion of their assets to equity (usually between 65% and 80%) and the remaining portion to debt securities and money market instruments (20% to 35%). This balanced approach allows investors to benefit from the potential growth of equities while also providing stability through the inclusion of debt instruments.
By investing in both asset classes, aggressive hybrid funds aim to provide investors with the best of both worlds. The equity component has the potential to generate higher returns over the long term, while the debt component offers stability and income. This combination can help mitigate the volatility typically associated with pure equity funds, making aggressive hybrid funds a suitable choice for investors seeking a balanced investment strategy.
2. Potential for Higher Returns
Another compelling reason to consider investing in aggressive hybrid funds is the potential for higher returns. While these funds allocate a portion of their assets to debt instruments, they still maintain a significant exposure to equities. This equity-heavy allocation allows investors to participate in the growth potential of the stock market.
Over the long term, equities have historically outperformed other asset classes, providing higher returns on investment. By including a substantial equity component, aggressive hybrid funds aim to capture these potential gains. Additionally, the fund managers of aggressive hybrid funds have the flexibility to adjust the allocation between equity and debt based on market conditions, potentially maximizing returns.
3. Tax Efficiency
Tax efficiency is an important consideration for any investment strategy, and aggressive hybrid funds offer certain advantages in this regard. In India, aggressive hybrid funds are treated as equity funds for taxation purposes. This means that investors can enjoy the benefits of equity taxation, even though the funds also have a debt component.
For investments held for more than one year, long-term capital gains (LTCG) of up to ₹1 lakh are tax-free, and any gains exceeding this amount are taxed at a rate of 10%. This favorable tax treatment can significantly enhance the post-tax returns for investors in aggressive hybrid funds. Additionally, dividend gains from these funds are taxed according to the investor's income tax slab, providing potential tax benefits for those in lower tax brackets.
Conclusion: Why Choose Aggressive Hybrid Funds?
In conclusion, investing in aggressive hybrid funds can offer several advantages for investors. The balanced allocation between equity and debt provides a level of stability while still allowing for potential growth. The potential for higher returns through equity exposure, coupled with the tax efficiency of these funds, makes them an attractive option for investors seeking a diversified investment strategy.
As you explore the world of aggressive hybrid funds and other investment options, it's essential to have access to reliable and comprehensive financial information. AssetPlus, a leading fintech platform, provides training and support to independent financial advisors, empowering them to offer personalized investment advice to their clients. With AssetPlus, investors can gain access to a wide range of investment opportunities and make informed decisions about their financial future.
Remember, investing is a long-term commitment, and it's crucial to stay informed and adapt your investment strategy as market conditions change. By choosing aggressive hybrid funds and leveraging the expertise of independent financial advisors trained by AssetPlus, you can take control of your financial future and work towards achieving your investment goals.