Topic 3 of 6~5 min read

Hybrid SIP

Definition

Hybrid SIP invests in hybrid/balanced mutual funds that combine equity and debt in a single fund. These funds offer a middle ground — moderate returns with moderate risk. The equity-debt ratio varies: Aggressive Hybrid (65-80% equity), Balanced Advantage (dynamic allocation), and Conservative Hybrid (10-25% equity).

In Simple Words

Hybrid funds are "all-in-one" funds that handle asset allocation for you. Instead of managing separate equity and debt SIPs, a hybrid fund does the balancing. Balanced Advantage Funds (BAFs) are especially popular as they dynamically adjust equity-debt allocation based on market valuations — increasing equity when markets are cheap and reducing when expensive.

Real-Life Scenario

For a 5-year goal of ₹10 Lakhs for a car: SIP in Aggressive Hybrid Fund: ₹12,500/month Expected return: 10% (blended) After 5 years: ₹10.17 Lakhs The hybrid fund provides reasonable equity upside while the debt portion cushions against sharp market falls.

Key Points to Remember

Combines equity and debt in a single fund

Aggressive Hybrid: 65-80% equity + 20-35% debt

Balanced Advantage: Dynamic allocation based on market valuations

Conservative Hybrid: 10-25% equity + 75-90% debt

Ideal for medium-term goals (3-7 years)

Tax: Treated as equity fund if equity allocation ≥ 65%

Great for first-time investors wanting one-fund solution

Balanced Advantage Funds handle market timing automatically

Frequently Asked Questions

Test Your Knowledge

1 questions to check your understanding

Question 1 of 1Score: 0/0

When is a hybrid fund treated as equity for tax purposes?

Summary Notes

Hybrid funds = one fund for equity + debt allocation

BAFs dynamically adjust — great for passive investors

Good for medium-term goals and first-time investors

Check equity percentage for tax classification