The one mutual fund every new investor should invest in

For those just starting out in investing, the question often arises: How can you dip your toes into the market without exposing yourself to too much risk? Aggressive hybrid funds could be the perfect solution. These funds strike the right balance, offering growth with less stress.

What are aggressive hybrid funds?

Aggressive hybrid funds are a mix of equities and debt, designed to offer a balance between growth and stability. Typically, these funds allocate a larger share of their assets, about 65-80 per cent to equities, while the remaining portion is invested in safer debt instruments like bonds.

Why are they ideal for new investors?

While pure equity funds may offer slightly higher returns, aggressive hybrid funds offer a critical advantage for new investors: volatility control. In a volatile market, the debt component of these funds helps cushion losses, making it easier for investors to stick to their plan without panic.

On the other hand, all-equity funds, with their heavy equity exposure, can experience wild market swings.

For new investors, these fluctuations can be shocking and lead to emotional exits. The unfortunate reality is that many of these investors, once they pull out in fear, never return to the equity markets, missing out on future opportunities. Aggressive hybrid funds avoid this trap, helping investors stay calm, ride out market turbulence and build wealth for the long haul.

10-year performance comparison: Aggressive hybrid vs. Flexi-cap funds

To truly grasp the benefits, let's compare the 10-year SIP returns of two popular equity-oriented categories: aggressive hybrid funds and flexi-cap funds.

Aggressive hybrid funds: Over the past 10 years, the category has delivered an average SIP return of 11.78 per cent annually.

Flexi-cap funds: Primarily invested in equities, flexi-cap funds offer flexibility in stock selection. Over the same period, the category has returned an average of 12.84 per cent annually, which is slightly higher than aggressive hybrids.

But here’s the deal: aggressive hybrid funds tend to fall less than all-equity funds during market downturns.

The chart below tells the story. Whenever the Sensex has fallen over 5 per cent in the last 10 years, aggressive hybrids have experienced milder losses compared to flexi-cap funds.

The last word

Aggressive hybrids are more than just a blend of equities and debt; they offer a strategic entry point into the market.

So, if you're starting your investment journey, don’t rush into the most aggressive options. Build your confidence first with a fund that gives you both growth and guardrails.

Want to know which aggressive hybrid fund our analysts trust the most? Head to Value Research Fund Advisor. Our experts have cut through the noise and shortlisted the best funds, not just based on returns—but also on quality, risk and consistency. Let our research work for you, so your money can work smarter.