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.

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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Planning of making your first investment?

One of the first excitements after you start earning is to make your first investment. You are curious as to the ways you can make the investment and if you have to just start small and choose amongst the many options to take the plunge. Just like any other first time investor, you are bound to come across many ideas from friends, colleagues and well wishers and probably, one of them would be mutual fund investments.

What is mutual fund?

A mutual fund is an investment programme that is promoted or created by shareholders amongst diversified holdings and trading. This is professionally managed and you would have experts looking after your investment, giving you a massive benefit. The mutual fund definition itself means creating a portfolio among different companies so as to get a balanced return.

How to make an investment?

One of the first tips for investment in a mutual fund is to understand the kind of companies that are going to be a part of the portfolio and the period of investment. You can gauge an approximate of the growth thinking about the industry as well as the exit time horizon. You would know how long you would be participating in the mutual fund as a whole too. It is key to understand what the estimates are from the mutual fund investments and how you can get the best results from it.

The main idea would be to keep a close watch on the growth of the fund and since it is one of the first investments to make, you can choose similar funds in the future. It is important to notice that these predictions being made are by experts and that they would consider the past and present market conditions to determine the future growth of the mutual fund.

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