Monday 24 August 2015

What is the difference between Debt fund & hybrid fund?

There are different types of mutual funds that exist in the market today and each of them have different priorities or growth plans and two of the different kinds of funds are debt funds and hybrid funds.

Debt fund

A debt fund is a mutual find that is invested mostly in the safer market like fixed income securities. Examples of these may be bonds and treasury bills, monthly income plans, short term plans, liquid funds and even fixed maturity plans. These are varied across short term, medium term and even long term investment plans and can be scalable across your requirements. These are in most cases planned by individuals who do not want to invest in risky or volatile market. This is a slow but steady return as compared to an investment in the stock market for example.


Debt mutual fund vs. hybrid mutual fund

Hybrid fund

It is a mutual fund investment that is determined by the portfolio that is created with a mixture of stocks. In most cases, this also includes different kinds of bonds too that can varied in a fixed proportion or floating structure. There are mainly domestic or international hybrid categories. These funds respond to market conditions and are passively managed with a fixed life cycle to get into a more aggressive structure.

The biggest difference in both of these equity funds is the location of investment in both cases. A hybrid fund is more balanced as you are investing in both stocks as well as bonds where as in a debt fund, you are restricting your investments to only a fixed income security. It is widely different when it comes to goals and outcomes even though you can see that it is for a different target category when it comes to buyers of both. Based on your requirement, you should settle on either one.

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