Best Aggressive Hybrid Funds
About Aggressive Hybrid Mutual Funds
Also known as aggressive mutual funds, these are hybrid funds that invest majorly in equity and also in debt securities. Such an asset allocation makes the fund relatively less risky than an equity-only fund, giving your portfolio a cushion against the volatility of stocks.
Most aggressive hybrid funds have varied asset allocations between debt and equity in line with the fund’s objective. However, SEBI has laid out some guidelines regarding asset allocation to distinguish between aggressive mutual funds and balanced hybrid funds. As per SEBI, aggressive hybrid funds can have an equity exposure ranging from 65% to 80% of the total corpus. This leaves out 35% to 20% for the debt portion.
How do Aggressive Mutual Funds Work?
Aggressive Mutual Funds represent a unique category of hybrid funds, allocating a substantial portion, typically between 65% to 80%, of their total assets to equity and equity-related instruments. The remaining 20% to 35% is invested in debt securities and money market instruments.
Aggressive Mutual Funds grant fund managers a significantly greater degree of autonomy compared to balanced funds. Unlike their balanced counterparts, these funds have the flexibility to seize arbitrage opportunities, where one buys a security in one market at a lower price and sells it in another at a higher price, capitalising on the price differential.
Moreover, fund managers have the latitude to adopt either a growth or value investing approach when selecting equities. Additionally, in the realm of debt securities, fund managers can choose from a range of options with varying sensitivities to interest rate fluctuations.
Features of Aggressive Hybrid Funds
- Aggressive mutual funds are similar to hybrid funds as they also invest in equity and debt. Thus, these funds enjoy the best of both worlds.
- Aggressive hybrid mutual funds invest a minimum of 65% of assets in equity, so they are considered equity funds for tax purposes.
- Aggressive funds are good candidates to help you meet your medium- to long-term financial goals. These could be accumulating a downpayment for your home, funding your children’s higher education, etc.
- Aggressive mutual funds have a relatively higher risk than debt-only funds but are lower than pure equity variants.
- In line with the risk, such funds tend to give higher returns than pure debt funds but lower compared to equity-only funds.
- Although the risk is lower than pure equity funds, the actual level of risk depends on its underlying securities. Low-quality debt funds, interest rate changes in the economy, and too much exposure to small- and mid-cap stocks can make aggressive hybrid mutual funds risky.
Advantages of Investing in Aggressive Hybrid Funds
- Aggressive mutual funds can invest 65% to 80% in stocks, giving your money a higher chance of multiplying.
- A debt allocation of at least 35% to 20% offers your portfolio a cushion against the volatility of stocks.
- Aggressive hybrid funds are ideal for medium to long-term investments, that is, for an investment horizon of over 3 years.
- Due to equity exposure, aggressive mutual funds can generate higher returns than pure debt funds.
- These funds are less volatile than pure equity mutual funds. Therefore, in times of market volatility, while equity-only funds would be hit severely, aggressive mutual funds would be less impacted thanks to the constituent debt assets.
- Although the asset allocation laid out by SEBI is stringent, fund managers are free to rebalance the portfolio based on market conditions. In a bullish market, they can increase equity allocation within the specified limit to capitalise on the stock rally. In a bearish market, they can increase the debt portion of their portfolio up to the specified limit to lower the risk of falling stock prices.
- As with any mutual fund, you can either invest a lump sum or make regular instalments via SIP to your aggressive mutual fund.
- Adding aggressive mutual funds to your portfolio can help diversify it. Such funds offer maximum wealth creation for relatively lower risk.
Risks Involved in Aggressive Mutual Funds
- Despite being relatively less risky than pure equity funds, the level of risk in an aggressive hybrid fund depends on the proportion of mid-cap and small-cap stocks it contains.
- If the fund manager is not careful when picking debt instruments, the fund will be exposed to the associated risks of low-quality debt securities.
- Despite having a debt asset allocation of 35% or more, their returns are not guaranteed. This is because the prices of the underlying debt securities are sensitive to changes in the overall interest rate in the economy.
- Aggressive hybrid funds also carry an expense ratio as with any other mutual fund. This is charged annually to manage your investment. A higher expense ratio eats into the fund’s profits. Therefore, consider the expense ratio and other deciding factors like risk, returns, volatility, etc., when finalising a fund.
Factors To Consider Before Investing in Aggressive Mutual Funds
Investing in aggressive mutual funds requires careful consideration due to their high-risk, high-reward nature. Here are the top six factors to keep in mind:
- Risk Tolerance: Assess your risk tolerance before diving into aggressive funds. These investments can be volatile, so make sure you are comfortable with the potential for significant fluctuations in your portfolio.
- Investment Horizon: Determine your investment horizon. Aggressive funds are best suited for long-term goals, typically with a horizon of 5 years or more, as this allows you to ride out market fluctuations.
- Fund Manager Expertise: Research the fund manager’s track record and expertise in managing aggressive funds. An experienced manager can make a significant difference in fund performance.
- Diversification: While aggressive funds focus on high-growth assets, ensure you have a diversified portfolio across different asset classes to spread risk.
- Expense Ratio: Keep an eye on the fund’s expense ratio. Lower expenses can enhance your returns over time, so choose cost-effective options.
- Monitoring: Regularly monitor your aggressive fund investments and be prepared to adjust your portfolio if necessary. Staying informed and proactive is key to managing the associated risks.
Who Should Invest in Aggressive Mutual Funds?
- Since aggressive hybrid funds majorly invest in equity, these are most suited for investors with a medium to high-risk tolerance. It is worth mentioning that with high risk comes the potential of earning high returns. But returns should not be the sole driver of your decision to invest in such funds.
- Those looking for maximum capital appreciation with less risk knowing that their portfolio has some sort of debt cushioning, can consider these funds.
- Investors with the appropriate risk tolerance who want to achieve medium to long-term goals of 3+ years can invest in aggressive hybrid mutual funds.
- Investors new to the stock market who wish to enjoy capital appreciation with a controlled risk can consider these funds.
Taxability of Aggressive Mutual Funds
- Capital gains:
- Short-term Capital Gains (STCG): Gains from units sold within a year of buying are STCG. They attract a 15% tax rate.
- Long-term Capital Gains (LTCG): Returns earned from selling units after holding them for a year are tax-free, up to ₹1 lakh. Any LTCG beyond this limit is taxable at 10% without indexation.
- Dividend taxation: The dividends received are added to the taxable income and are taxed as per the income bracket of the investor. In addition to this, there is a 10% TDS on the dividend exceeding ₹5,000 in a financial year.
How to Invest in Aggressive Mutual Funds?
Investing in Aggressive Mutual Funds can be done seamlessly through your Angel One account. Here’s a guide to complete the process:
Step 1: Access your Angel One account using your registered mobile number. Validate the OTP and enter your MPIN for authentication.
If you don’t have a Demat account with Angel One, you can quickly open one by completing the KYC procedure and submitting the necessary documents.
Step 2: Choose the most suitable fund based on your financial goals and risk tolerance. Utilise the mutual fund section on the Angel One app to assess various options. Consider the following factors during this stage:
- Search for the specific fund you wish to invest in or explore funds recommended by Angel One across different categories.
- Evaluate the fund’s historical performance, tax implications, sectors and stocks it invests in.
- Calculate potential returns using available tools and resources.
- Assess the fund’s level of risk and match it with your risk tolerance.
- Refer to ratings provided by reputable rating agencies, typically ranging from 1 to 5 stars.
- Take into account the fund’s expense ratio to understand the associated costs.
Step 3: Once you’ve made your fund selection, log in to your Angel One account, navigate to the Mutual Funds section, and locate your chosen fund. Since mutual fund investments often involve a long-term commitment, make sure to consider the following:
- Decide whether you want to invest a lump sum amount or set up a monthly Systematic Investment Plan (SIP).
- Enter the desired investment amount and choose your preferred payment method, with UPI being the recommended option. Alternatively, you can opt for net banking.
- If you’re opting for the SIP route, you can set up a mandate for future instalments, ensuring a hassle-free investment experience.
Top 5 Aggressive Mutual Funds
| Fund Name | AUM ( in ₹ crores) | CAGR 3Y (%) | Expense Ratio (%) | CAGR 5Y (%) |
| Bank of India Mid & Small Cap Equity & Debt Fund | 1,053.73 | 0.84 | 17.73 | 27.75 |
| JM Aggressive Hybrid Fund | 762.93 | 0.66 | 22.73 | 25.59 |
| Quant Absolute Fund | 2,115.36 | 0.72 | 14.15 | 24.72 |
| ICICI Pru Equity & Debt Fund | 40,089.04 | 0.98 | 18.81 | 22 |
| Mahindra Manulife Aggressive Hybrid Fund | 1,522.49 | 0.48 | 16.76 | 20.99 |
Note: The above-mentioned top funds are for informational purposes only and are not recommendations. The funds are based on a 5-yr CAGR as of January 8, 2025, which is subject to change frequently. Check out real-time data on Angel One.
Bank of India Mid & Small Cap Equity & Debt Fund
The Bank of India Mid & Small Cap Equity & Debt Fund holds an AUM of ₹1,053.73 crore and invests in a mix of mid- and small-cap equities along with debt instruments. It offers a 3-year CAGR of 17.73% and a 5-year CAGR of 27.75%, indicating strong historical performance. With an expense ratio of 0.84%, the fund provides a balanced exposure to equity and debt, making it a less risky option compared to pure equity funds.
JM Aggressive Hybrid Fund
The JM Aggressive Hybrid Fund manages ₹762.93 crore in assets and invests in both equity and debt instruments. It has delivered a 3-year CAGR of 22.73% and a 5-year CAGR of 25.59%, reflecting robust growth over the years. The expense ratio is 0.66%, making it cost-efficient for investors. By balancing equity exposure with debt instruments, this fund provides a relatively stable investment option while maintaining the potential for significant returns over the long term.
Quant Absolute Fund
The Quant Absolute Fund, with an AUM of ₹2,115.36 crore, combines equity and debt investments to deliver balanced growth. It has achieved a 3-year CAGR of 14.15% and a 5-year CAGR of 24.72%, showing consistent performance. The expense ratio of 0.72% ensures competitive costs for investors. With a strategy focused on balancing risk and reward, this fund appeals to those seeking a mix of capital appreciation and financial stability.
ICICI Pru Equity & Debt Fund
The ICICI Pru Equity & Debt Fund boasts an AUM of ₹40,089.04 crore, making it one of the largest in its category. It has delivered a 3-year CAGR of 18.81% and a 5-year CAGR of 22%, showcasing consistent returns over time. With an expense ratio of 0.98%, the fund balances equity and debt exposure, providing a stable yet growth-oriented option for investors. Its large asset base underscores the confidence of investors in its performance and management.
Mahindra Manulife Aggressive Hybrid Fund
The Mahindra Manulife Aggressive Hybrid Fund, managing ₹1,522.49 crore in assets, blends equity and debt investments to offer balanced returns. The fund has achieved a 3-year CAGR of 16.76% and a 5-year CAGR of 20.99%, indicating solid historical growth. With an expense ratio of 0.48%, it offers an economical choice for investors seeking a combination of equity growth and debt stability.
Mutual Funds Calculators
FAQs FAQs
Are aggressive mutual funds high-risk?
Should I invest in aggressive mutual funds?
You can consider investing in aggressive mutual funds in case:
-You have a moderate- to high-risk tolerance
-You want to earn maximum capital appreciation for moderate risk
-You want to accumulate funds to meet medium to long-term goals
-You want to earn higher returns than pure debt funds
What are the expected returns of aggressive hybrid funds?
What are the risks involved in investing in aggressive mutual funds?
Are aggressive mutual funds taxable?
How much money should I invest in aggressive mutual funds?
