In many parts of the country The early monsoon has given relief from the heat. We are enjoying the first rain of this season, but we never forget to keep the umbrellas and raincoats ready to avoid getting wet and sick in the rain. In the same way, equity market may also be unexpected. Even though market volatility cannot be avoided, we can definitely reduce its effect. You can do this work through hybrid funds. Benefits of this fund by Franklin Templeton India MF’s portfolio manager and Vice President, Rajsa.
Be careful with market fluctuations
From May 22, 1995 to May 22, 2025, the Sensex has increased by 24 times, but the journey has never been without fall. For example, a market decline of 15% has been observed after Global Financial Crisis (2008), Kovid-19 crisis (2020) and recently the US announcement of trade tariffs (April 2025). This instability, which came out in such a short time, has worried the low risk investors. How can such investors make wealth by participating in the market despite being alert to the risk? Hybrid funds can be the answer.
Why does it reduce the risk?
These funds invest in two or more asset classes. They have less or not. In some cases, one asset class may record a lower decline than another (equity and date), or one asset class may grow when the other is falling (Gold and Equity). Such diverse investment reduces the instability in fund portfolio. Returns become comfortable and the impact on the fund portfolio in one asset class decreases.
Let’s understand with an example. Suppose, you are a working mother who wants to raise funds for her child’s higher education. You have targeted to invest for 10 years and you need a large corpus fund to fulfill your child’s dreams. You are not comfortable with too much instability. In such a situation, this investor has many options to consider.
She can consider hybrid funds such as Balanced Advantage Fund. It invests in equity and date securities and manages dynamic allocation in both asset classes based on market condition. This provides better risk-adjustable returns. She can also invest in multi-asset allocation funds, which by investing in three asset classes such as equity, date and commodities provides diversity.
Where to invest a target of 3 years?
Investors who aim at a small investment period of up to 3 years can invest in equity savings funds. These funds invest in equity, arbitration opportunities and date. It contains marginal equity component, which reduces the downside risk. These funds are also suitable for investors who want to invest for regular income through a Systematic VIPELL Plan (SWP).
Hybrid funds that maintain more than 65% equity allocation get the benefit of equity taxation, where 12.5% tax is levied on long-term capital gains of more than Rs 1.25 lakh in a financial year, not at the investor’s slab rate. So, make the market volatility your friend by adopting hybrid mutual funds.
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