Conservative Hybrid Mutual Funds

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Conservative Hybrid Mutual Funds are usually for investors who prefer stable returns with limited exposure to market fluctuations. This type of mutual fund can be beneficial if you have any financial goal or want to explore something different than the traditional investment options.

Read on to learn more about Conservative Hybrid Mutual Funds, their benefits, and whether they suit your investment goals.

What are Conservative Hybrid Mutual Funds?

Conservative Hybrid Mutual Funds are part of the hybrid mutual funds. These types of funds mostly invest in fixed income debt securities, which ensures that investments made by investors are stable and lower risk than other investments.

This fund is ideal for beginners who want to diversify their portfolio or for those looking to preserve wealth while benefiting from market returns.

How do Conservative Hybrid Funds Work?

As per SEBI norms, Conservative Hybrid Funds invest 10% to 25% in equity and equity related instruments, the rest 75% to 90% is invested in Debt instruments. A debt mutual fund makes up the majority of this allocation, providing stability and lower risk.

As the name suggests, these funds are meant for investors with a conservative risk profile. Read on to know more about the key benefits of this mutual fund.

Benefits of Conservative Mutual Funds

For many low and high-risk investors, investing in Conservative Mutual Funds is a strategic decision due to its benefits such as:

Higher Returns than Fixed Deposits

When compared to traditional investments such as fixed deposits, recurring deposits and government saving schemes, Conservative Hybrid Mutual Funds combine debt funds with limited equity exposure, which can yield better returns while keeping risk to a minimum.

Relatively Lower Risk than Equity Funds

The focus of a Conservative Hybrid Mutual Fund is to be a safer investment when compared to equity funds or other aggressive hybrid mutual fund options. 

Diversified Portfolio for Stability

Conservative Hybrid Mutual Funds offer diversified investment options as these funds invest in both debt and equity securities. This strategic allocation can help investors preserve their wealth in various financial conditions and enjoy the growth opportunities.

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Who Should Invest in Conservative Hybrid Funds?

Conservative hybrid mutual funds are suitable for medium to long-term investment horizon. This type of mutual fund would be ideal for investors such as:

First-Time Investors

Investors who are starting to invest in mutual funds, or looking to diversify from traditional investment opportunities such as fixed deposits, will find Conservative Hybrid Funds a safer option to invest their funds in. 

Individuals Planning for Retirement

If you are looking to invest for the long term, then investing in this type of mutual fund could be beneficial. A Conservative Hybrid Mutual Fund focuses on a steady growth of investment which is why it invests primarily in debt and fixed income instruments.

Conservative Investors Seeking Better Returns Than FDs

Investors looking for inflation-beating financial options can consider investing in a Conservative Hybrid Fund. These mutual funds deliver an average return of 10 to 12% which is more than traditional FDs.

It should also be noted that though Conservative Hybrid Funds invest in low-risk securities, they do have some exposure to market through equity investments.

Things to Consider Before Investing in Conservative Hybrid Funds?

Now that we have covered the meaning, functions, and suitability of Conservative Hybrid Funds, here are a few things to consider before investing:

Your Investment Goals:

These mutual fund schemes are meant for short to medium-term financial goals, typically over a period of three to five years. It can also be ideal for planning for retirement, child’s education or a family event.

Risk Appetite:

This type of mutual fund doesn’t get affected by the sharp ups and downs seen in equity-only fund schemes. Because its fixed income securities provide a steady and predictable return.

Expense Ratio:

When comparing options, focus on funds with a low expense ratio, as this helps you keep more of the returns. 

Fund Performance:

Take a look at the performance history of the mutual funds, as this can give an idea of how the fund will perform in the future. 

Taxation Rules on Conservative Hybrid Mutual Funds

When investing in Conservative Hybrid Mutual Funds, it’s important to know how your returns are taxed. To understand the tax rules for this mutual fund scheme, refer to the table below:

How to Invest in Conservative Hybrid Mutual Funds

If you are considering investing in Conservative Hybrid Mutual Funds, follow these simple steps to get started:

1. Identify your investment objective and shortlist the best Conservative Hybrid Funds that match your investment goals. Look at the mutual fund’s investment portfolio, past returns and reputation.
2. Set up your investment account with a reliable platform or bank. Make sure your KYC is completed, which is required before you can invest.
3. Decide your investment strategy which can be either lump sum amount or SIP (Systematic Investment Plan).
4. Review your investments regularly and tweak your investment as per the market changes to align with your financial goals.

If you hold a DBS Treasures Premium Savings Account, you can access curated mutual fund options and investment guidance from experts to ensure you are on the right path for your personal finances.

Should I Invest in Aggressive or Conservative Funds?

When choosing between aggressive and Conservative Hybrid Mutual Funds, it’s essential to understand the key differences. Here’s a comparison to help you decide which type aligns best with your investment goals:

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Conclusion

Investors who are exploring different types of mutual funds to begin their investing journey, may find Conservative Hybrid Mutual Funds to be a safer choice. This mutual fund scheme is also good for investors who want to have a stable instrument in their investment portfolio.

It’s important to make sure that your investments are made after due diligence and research. Consider services like the wealth management from DBS Treasures that is supported by a team of wealth professionals who can support your daily banking and investment needs.

Disclaimer: Investment in mutual funds is subject to market risks. It's advisable to read all scheme-related documents carefully and consult with financial advisors before making investment decisions.