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Conservative Hybrid Funds: Benefits, Taxation & Top 2024 Funds
A conservative hybrid fund is known as a low-risk investment option. The name gives you a fair idea of a conservative hybrid fund’s associated risk, offering a unique combination of safety, stability, and potential for profit. It ideally entails both debt and equity funds. This enables you to minimise risk yet expect reasonable returns. Nonetheless, there are certain things you should be aware of before finalising your decision. To help you make more informed choices, Urban Money offers a detailed overview of a conservative hybrid fund. We focus primarily on aspects such as the working principles of a conservative hybrid fund, the top funds available in the market, relevant benefits, associated tax implications, and a step-by-step guide to investing in a conservative hybrid fund. Let’s scroll down to learn more.
What is a Conservative Hybrid Fund?
The conservative hybrid fund is a type of mutual fund. It invests 75% to 90% of its assets in debt instruments such as bonds, debentures, and government securities. The remaining 10% to 25% of assets would be allocated to equity instruments such as stocks and shares. This unique combination of high-volatility yet high-return debt instruments and low-volatility and low-return equity instruments ensures a balance between growth and security. However, the conservative hybrid fund stands distinctive as it encompasses debt and equity instruments. This fund aims to provide steady income and capital preservation, along with the potential to generate capital appreciation. The formula to calculate the NAV per unit on your chosen Fund is as follows:
NAV Per Unit = Total Number of Units ÷ Net Assets in the Mutual Fund
Where,
- NAV: Net Asset Value
- Total Number of Units: The number of shares or units issued by the mutual fund to its investors.
- Net Assets in the Mutual Fund: The value of all the assets under the fund’s scheme minus the fund’s liabilities and expenses.
To illustrate, suppose a fund has net assets of ₹500 Cr and a total number of units of 50 Cr; then its NAV Per Unit is:
NAV Per Unit = 500 / 50 = ₹10
This means that each unit or share of the fund is worth ₹10.
Best Conservative Hybrid Mutual Funds Available 2024
Fund Name | Return per annum | Expense Ratio | Fund Size |
ICICI Prudential Regular Savings Fund | 10.82% | 0.91% | ₹3,381 Cr |
SBI Conservative Hybrid Fund | 11.90% | 0.62% | ₹9,482 Cr |
Kotak Debt Hybrid Fund | 13.57% | 0.50% | ₹2,249 Cr |
Aditya Birla Sun Life Regular Savings Fund | 10.56% | 0.99% | ₹1,435 Cr |
Canara Robeco Conservative Hybrid Fund | 10.17% | 0.66% | ₹1,007 Cr |
HDFC Hybrid Debt Fund | 12.52% | 1.26% | ₹3,055 Cr |
Bank Of India Conservative Hybrid Fund | 14.02% | 1.44% | ₹67 Cr |
Axis Regular Saver Fund | 08.88% | 0.86% | ₹362 Cr |
Baroda BNP Paribas Conservative Hybrid Fund | 09.66% | 0.56% | ₹599 Cr |
UTI Conservative Hybrid Fund | 10.75% | 1.2% | ₹1,576 Cr |
Benefits of Conservative Hybrid Funds
Here are the key benefits of conservative hybrid funds:
- Greater Return: It allocates assets in both debt and equity instruments. This enables you to earn better returns than those from bank fixed deposits or solely debt funds.
- Minimal Risk: It highly invests in debt instruments over equity. This allows you to anticipate a risk-free investment journey compared to other mutual fund investments.
- Diversification: It empowers you to diversify your portfolios in debt and equity markets. This facilitates you to spread risk across different markets rather than relying on any single one.
- Income Generation: It provides regular profit from the interest payments on debt instruments. This ensures you receive a stable income, typically in a monthly vice.
Are Conservative Hybrid Funds Goods for You?
Conservative hybrid funds are well-suited for individuals who:
- Aim to begin investing in equity with a balanced approach.
- Desire returns that are higher than fixed deposits or pure debt funds
- Favour investments that are less riskier and volatile than other types of mutual funds.
- Seek a diversified portfolio that encompasses both equity and debt.
- Have a medium to long-term investment horizon, such as 2 to 5 years or more.
Tax Implications for Conservative Hybrid Funds
The taxation of conservative hybrid funds depends on the holding period of the investment. Namely, it can be divided into two categories: long-term capital gain tax and short-term capital gain tax. Let’s examine both.
- Short-Term Capital Gains (STCG): As the investment would be held for less than three years, it falls under the short-term capital gains tax. In such cases, the capital gains will be taxed as per your applicable income tax slab rate.
- Long-Term Capital Gains (LTCG): As the investment would be held for over three years, it falls under the long-term capital gains tax. Here, the capital gains are taxed at 20% with indexation benefits.
How Do You Invest in Conservative Hybrid Funds Online?
You can invest in a conservative hybrid fund by following the simple steps below:
- Visit any online platforms that facilitate mutual fund investment at your preference.
- Choose the fund that best suits you based on your investment goal and the fund’s performance.
- Click on the “Invest” option and choose the investment amount and method, whether SIP or Lumpsum.
- Provide your KYC details and follow the instructions to proceed further.
- Once you complete, you will receive the confirmation message and your customer ID to your registered phone number.
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