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What is hybrid debt fund?

A hybrid debt fund or a debt-oriented hybrid fund has been formally classified by the Securities and Exchange Board of India (SEBI) as conservative hybrid fund. Such funds predominantly invest in debt instruments intending to generate a secure income/ capital appreciation. SEBI stipulates that a conservative hybrid fund should invest 75% to 90% of its total assets in debt securities and money market instruments. The rest is invested in equity and equity-related instruments. Typically, the equity portfolio is diversified across major industries, market cap and sectors to ensure an acceptable risk-reward balance.

Factors to be considered while investing in a hybrid debt fund

Here are some of the factors you should consider when selecting a hybrid debt fund to invest in:

Why should you invest in hybrid debt funds?

An investment in a hybrid debt fund is considered a good option for investors looking for long term capital appreciation. The higher exposure to debt instruments keeps the risks associated with the fund low, while a small equity component promises a higher long-term return compared to a pure debt fund. Debt oriented mutual funds are also a good option for anyone looking to earn a passive monthly income from their investments.