The investment landscape in 2025 presents a unique challenge: US markets are hovering at all-time highs, gold has breached record levels, and equity valuations across the board seem stretched. For investors, where should you invest in when everything appears expensive?
The traditional wisdom of ‘waiting for a dip’ can often mean missing out on opportunities altogether, as markets can remain elevated for extended periods. This is precisely where hybrid mutual funds shine. Rather than trying to time the market or zero in on a single asset class, investors can start a Systematic Investment Plan (SIP) in a fund that professionally manages wealth across multiple asset classes. This approach allows you to participate in the market while the fund manager handles the complex task of rebalancing between equities, debt, and even commodities based on valuations and market conditions.
What Are Hybrid Funds?
Hybrid mutual funds, also known as balanced funds, invest in a mix of equity, debt and commodities. This diversification across asset classes makes them particularly attractive for investors who want exposure to multiple markets without having to manage separate portfolios.
Types of Hybrid Funds
India’s mutual fund industry offers several varieties:
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Aggressive Hybrid Funds: 65-80% equity exposure for growth-oriented investors
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Conservative Hybrid Funds: 10-25% equity for risk-averse investors
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Balanced Hybrid Funds: 40-60% equity for moderate risk-takers
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Dynamic Asset Allocation Funds: Flexible allocation based on market valuations
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Multi-Asset Allocation Funds: Invest across three or more asset classes including equities, debt, and commodities
An interesting evolution in hybrid funds is the inclusion of commodities, particularly in multi-asset allocation funds. SEBI regulations require these funds to invest at least 10% in each of three asset classes, with gold being the most commonly included commodity.
Fund managers typically gain commodity exposure through gold ETFs or gold mutual funds. This addition brings significant benefits: commodities act as an inflation hedge, provide further diversification due to their low correlation with equity and debt markets, and offer portfolio stability during market downturns. Gold, in particular, tends to hold its value when traditional markets face volatility, making multi-asset funds an even more comprehensive diversification tool for investors in 2026.
Hybrid funds are ideal for investors who are new to equity markets, those nearing retirement seeking moderate growth with reduced volatility, or anyone looking for a single-fund solution for their investment needs.
Which Hybrid funds have you added to your watchlist or portfolio?