How are Hybrid Funds Different from Equity Funds?


  • Know the difference between a Hybrid and an Equity Fund
  • Know about the parameters that separate a hybrid fund from an equity fund.
  • What are the risks involved in investing in both hybrid and equity funds?

Mutual funds, a pool of money collected from several investors to serve the common investment goal, are broadly categorized into equity, debt and hybrid schemes. Out of these three, equity and hybrid are comparable because both invest a significant chunk in the high-return proposition of stocks. Now, how to compare these two funds? Should it be based on the risk they contain or their return value? In this article, we will tell you the difference between a hybrid fund and an equity fund. But before that, it’s important to know the basics of these two funds.

A Close Look at Hybrid & Equity Funds

A hybrid fund is a type of mutual fund which invests in more than two asset classes. These asset classes can be stocks (Equity instruments), bonds (Debt instruments), gold, or even in cash. Whereas, an equity fund is a type of mutual fund that invests in equity and equity-related instruments of different companies. The primary aim of any equity mutual fund is to get higher returns. 

The hybrid fund has many categories according to their asset allocation proportion. One of which is an Aggressive Hybrid Fund, which would be perfect to differentiate between an equity and a hybrid fund as they have a lot of commonalities and yet different from each other. An equity fund is riskier than an aggressive hybrid fund as an equity fund invests most of its corpus in equity shares of the company. Whereas an aggressive hybrid fund can invest a minimum of 65% of its corpus in equity and remaining corpus in the debt-related instruments which act as a cushion in times of market fluctuations and makes it less risky.

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Various Parameters On Which You Should Compare Equity Fund and an Equity-oriented Hybrid Fund:

We can distinguish an aggressive hybrid fund and an equity fund based on aspects like their types, risk factors, type of investor, features, etc.

Risk Involved: The risk attributed to an equity fund amounts higher as the performance of it is contingent on how the market behaves at different points of time. Whereas, in an aggressive hybrid fund, the risk quotient is comparatively low because of the asset allocation method.

Return Value: The return value generally depends on the risk a mutual fund holds. So if you’re looking for a stable income with minimal risks, then it’s best to invest in an aggressive hybrid fund. And, if you’re ambitiously looking for higher returns with an increased risk, then you should invest in an equity fund. In an equity fund, you can get before-tax returns ranging from 10% to 12% on an average. 

Nature of Investor: A hybrid fund is equally ideal for a budding investor and a seasoned investor because of the various asset allocation schemes and the least amount of risk involved in it. Whereas, an equity fund is usually preferred by investors who can bear more risks.

Types of funds: A hybrid fund can be classified into various categories according to their asset allocation proportions. Some of them are equity-oriented hybrid funds, debt-oriented hybrid funds, balanced hybrid funds, etc. Similarly, equity funds can also be classified into different categories based on various factors such as market capitalization, investment strategy, tax treatment, and investment style. Some of them are large-cap, mid-cap, active funds, passive funds, small-cap funds, among others.

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What are the top-performing Equity Funds?

Below is a list of top-performing equity mutual funds in India.

Equity Mutual FundsRating 1-year Return3-year Return5-year Return10-year Return
Mirae Asset Large Cap Fund5-Star7.67%
Reliance Large Cap Fund5-Star3.88%9.49%10.11%11.61%
ICICI Pru Bluechip Fund4-Star3.89%8.99%9.42%12.83%
SBI Bluechip Fund4-Star8.63%7.03%10.26%11.52%
HDFC Top 100 Fund4-Star4.95%8.98%8.36%11.16%

What are the top-performing Aggressive-Hybrid Mutual Funds?

Check out some of the top-performing Equity-hybrid mutual funds in India. 

Aggressive-Hybrid Mutual FundsRating 1-Year Return3-Year Return5-Year Return10-Year Return
Principal Hybrid Equity Fund5-star-0.36%8.27%9.80%10.41%
SBI Equity Hybrid Fund4-star11.60%9.46%11.00%11.92%
DSP Equity & Bond Fund4-star12.70%7.83%11.01%11.22%
HDFC Hybrid Equity Fund4-star7.47%8.03%10.12%14.42%
ICICI Prudential Child Care Fund - Gift Plan3-star2.64%5.46%7.18%11.97%

What are the Various Modes of Investment in Top-performing Mutual Funds Online?

You can invest in mutual funds by either lumpsum or SIP (Systematic Investment Planning). The lumpsum method comes handy when you have surplus money to invest it for one-time. Whereas, through SIP, you can invest a fixed amount of money every month.

NoteThe data is sourced from Value Research as of September 24, 2019. Also, it denotes the regular plan of the scheme mentioned above.

Disclaimer – “Mutual fund investments are subject to market risks. Please read the scheme document carefully before investing”.

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