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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How to invest in mutual funds

Rarely does one make a profit out of an investment without research. Before you look at investing your money, you must look at the market conditions and if the investment matches your requirement. There are several factors that contribute to the success of a fund investment and timing and fund selection are the most important of them. Yes, there are different requirement for so different investors, so let’s take a look at what you should know before you invest in mutual funds. 

What is mutual fund in the first place? It is a diversified investment in a set of companies or equities that will give you a return over a period of time, based on the performance of the overall set of companies. You can choose sector specific mutual funds which can be targeted to pharmaceuticals, energy, petro companies and so on. You can also invest based on the market cap of the company. Large cap, medium cap and small cap are the three major kinds. It is based on your take to a volatile investment that you can choose which of the three to choose. These are the mutual fund basics that you have to know before you go ahead making an investment. These are tax saving funds too and would give you a healthy benefit in income tax. To understand which kind of mutual fund definition of market cap would suit you best – speak to your financial advisor or an industry expert. The performance of your investment depends on the market condition and hence you require expert guidance.

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Why You Should Invest in Mutual Funds in 2015?

Mutual Funds are some of the most sought after investment opportunities. They offer good returns and a great sense of security that most other investment opportunities cannot provide for their investors. At the start of the year, mutual funds faced a slump of sorts, but market analysts expect the year to be quite fruitful for those who have made the smart decision of investing their money in mutual funds. However, those who have predicted good returns from the market have also stated that these returns will depend on certain factors that will act as benchmarks for the market through the year. These benchmarks include the pricing of crude oil, which saw a slump last year, and a hike in the rates of the Central Bank.

Mutual Funds

The decrease in the crude oil prices hit the energy sector in a bad way. At the end of 2014, energy mutual funds were seen as the biggest losers, and these doesn’t seem to be any respite in sight for these funds. On the other hand, this slump in prices has been most beneficial for airlines, as airline stocks skyrocketed. Therefore, on the whole, the lowering of crude oil prices has benefitted the market.

After the financial crisis in 2008, the Federal Reserve System set up some aggressive measures in the form of rates being at an all-time low, and repurchasing assets. The central bank completed its 3 rounds of repurchases by October 2014, but they continued to keep their rates low. It is however expected that they will raise the rates during this year, which will have a positive effect on the market, as profit margins are expected to rise.

Based on the market expectation, market analysts have handpicked the T. Rowe Price Health Sciences Fund, the Fidelity Select Transportation Fund, and the T. Rowe Price Global Technology Fund as the three funds to have invested in this year. They feel that these funds are most likely to give you the best returns for your money. Always remember to check all fund documents before you finally decide where to invest your money.

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Why You Should Invest in Balanced Funds

While most people like to save their money for rainy days, that aren’t entirely sure of how to make sure they have enough money when that rainy day rolls around. Most people prefer security and aren’t too thrilled with dealing with unknowns, which is why Fixed Deposits are the most common way Indians like to save their money. However, with inflation going through the roof recently, people have realized that they need a way to make their savings work for them. The safe fixed deposits with their low returns aren’t going to cut it for those people saving for their children’s education and wedding, and their own retirement. The desperate need to save more money than possible has led to the growing popularity of investments in India.

Balanced/Hybrid Mutual Fund

Investments are still a bit of a gamble, and most people lean towards putting their money in Mutual Funds. These funds pool together money from numerous investors and then a market expert invests the money for them. As safety goes, mutual funds are seen as the safest, but coming a close second are balanced funds, also known as equity-oriented hybrid funds. These funds have a very low risk factor and are perfect for first-time investors who aren’t sure what their risk-appetite really is. The funds also invest over 65% of funds in equity, and this gives investor certain tax benefits as well, making it all the more beneficial. People who are looking to invest for the first time, can try putting their money in balanced mutual funds by adopting an SIP route. It is preferable to invest money when the market is at a low, so you can reap higher benefits when the market rises.

Over the past year, equity and debt market funds were found to be volatile, and did not provide very high returns. While balanced funds on the other hand performed better than some mid-cap and large-cap funds in certain cases. While your financial goals will obviously dictate how you invest your money, it is a good idea to fully understand the investment before you make one.

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