Dhirendra Kumar talks about the benefits of investing in hybrid funds
Hybrid funds have been slow to recover following the recent market crash. So, after my retirement, would it be better for me to divide the corpus into two categories - liquid funds and equity funds? Or will it still be better to invest in hybrid funds?
- Gautam Ghosh
You are currently looking at one side of the story. Yes, hybrid funds have recovered slowly after the recent market crash. But what is equally true is that these funds have been able to manage the fall in a much better way than equity funds. These funds did not fall freely during the market crash. The 30-35 per cent allocation of these funds to fixed income provides stability to these funds and hence, they are more cushioned to falls, thereby saving investors from any nasty surprise.
However, the real charm of hybrid funds is the simplicity they offer to investors. These funds save investors from the headache of rebalancing their asset allocation on a periodic basis and take care of the tax implication that would have aroused had an investor undergone rebalancing of his investments on his own. Although I agree that our own research has proved that having a separate fixed income portfolio and an equity portfolio may lead to lower expenses and in some cases even marginally better returns, great efficiency is required to rebalance. Therefore, investors just may be better off unless the investment amount is highly considerable.