Hybrid Mutual Funds

More than one kind of investment, inside a single fund. A mutual fund is a pool of money from many people, invested by a professional manager under SEBI rules. Each kind of investment is an asset class.

The two main ones here are equity, meaning shares of companies, and debt. Debt means loans to governments, banks or companies, in the form of bonds and similar paper.

A leftover slice, the residual portion, may go into things like gold and silver ETFs (exchange-traded funds) or InvITs (infrastructure investment trusts). Foreign shares are not a separate asset class.

No hybrid category (SEBI's label for what a fund may hold) has a lock-in, a period during which you cannot sell. A fund house may run only one fund in each category.

By what each must hold. Three hybrid categories get a fixed range for shares and another for debt, as a share of total assets. The other four are defined by strategy.

Arbitrage means buying a share and, at the same time, selling a futures contract on it. A futures contract is an agreement to trade at a set price on a later date. A share paired this way is hedged. The fund aims to earn the gap between the two prices.

SEBI's name for dynamic asset allocation is "Balanced Advantage Fund / Dynamic Asset Allocation Fund", so a fund may use either name. It is a separate category from balanced hybrid, though the words look alike.

It depends on the category. The riskometer is the risk label SEBI makes every fund show, on six levels from Low to Very High, checked every month.

On 29 September 2026, listed hybrid funds read anywhere from Low to Very High on the riskometer, depending on the category:

• Most listed arbitrage funds read Low.
• Most listed equity savings funds read Moderate.
• Most listed conservative hybrid funds read Moderately High.
• Most listed balanced hybrid funds read High or Very High.
• Nearly all aggressive hybrid funds, and most dynamic asset allocation and multi asset allocation funds, read Very High.

In a fund holding shares and bonds, SEBI scores each part, weights it by its share of the fund and adds them up. The total maps to one of the six levels. Hedged shares, and the futures paired with them, are left out of the score.

If market moves alone push a fixed-range fund outside its SEBI range, it has 30 business days to rebalance, or bring its mix back.

Koshex, an AMFI-registered distributor (ARN-154632), reviews your holdings over time and flags it when a fund's riskometer level or category shifts.

Because the tax follows what each fund actually held over the year, not its category name. The Income-tax Act, 2025 sets three tests.

• Equity-oriented fund: at least 65% in shares of Indian companies listed on a recognised stock exchange, on the annual average. A short-term capital gain, on units held 12 months or less, is taxed at 20%. A long-term capital gain is taxed at 12.5%, only on the part above ₹1,25,000 in a tax year.
• Specified Mutual Fund: more than 65% in debt and money market instruments. Units bought on or after 1 April 2023 are taxed at your slab rate, the rate on your normal income. That holds whatever the holding period, how long you have owned a unit.
• Neither: units held 24 months or less are taxed at your slab rate; after that, 12.5% on the whole gain.

Suppose three hybrid funds each give an assumed gain of ₹2,16,000 on units bought after 1 April 2023 and held 30 months. Assume no surcharge (total income up to ₹50 lakh) and no other equity gains that tax year. Each bill includes 4% cess, an extra charge on the tax:

• Fund A, equity-oriented: 12.5% on the ₹91,000 above ₹1,25,000, so ₹11,830.
• Fund B, a Specified Mutual Fund: ₹44,928 at a 20% slab, or ₹67,392 at 30%.
• Fund C, neither: 12.5% on the whole gain, so ₹28,080.

Same gain, three bills. It is an illustration; the fund's own holdings decide which case applies.

A balanced hybrid fund meets neither test while inside its 40% to 60% ranges. A conservative hybrid fund keeps 75% to 90% in bonds, so most such funds are Specified Mutual Funds for tax. But the test is on the fund's actual average holdings, so check. Aggressive hybrid, arbitrage and equity savings funds are equity-oriented only if they pass the 65% Indian listed shares test on the annual average. For dynamic asset allocation and multi asset allocation funds, it depends on the fund.

Some fund houses state a fund's tax status in the factsheet or scheme document. If yours does not, ask the fund house before relying on equity tax rates.

IDCW means payouts from a fund's income or gains, which cut its NAV (the price of one unit) by the amount paid. They are taxed at your slab rate. Once your IDCW from a fund house crosses ₹10,000 in a tax year, it deducts 10% TDS (tax deducted at source) on the whole amount. Redemption gains of a resident carry no TDS.

The one whose horizon fits when you will need the money. Koshex suggests 3 months to 1 year or more for arbitrage funds, and 5 years or more for aggressive hybrid and multi asset allocation funds.

An exit load is a fee some funds charge if you sell within a set time. SEBI does not set one for any hybrid category. Each fund sets its own in its scheme document; many charge one if you sell within a year, or within 30 days. Some let you sell part of your units free of it. There is no lock-in. Sale money must reach you within 3 working days.

A SIP puts in a fixed amount at regular intervals, usually monthly. A lumpsum is a larger amount put in at one time. Each SIP instalment has its own holding period.

Koshex can help you choose a category and fund that suit your goal and timeline. When markets fall sharply, Koshex talks you through it before you redeem.

Compare funds inside one category, not across the class: an arbitrage fund and a multi asset fund follow very different rules.

There are 208 listed hybrid funds (regular plan, growth option), with ₹13,04,718 Cr in AUM, the current total value of money they manage. 150 of them have a full 3-year record, so they are ranked on 3-year return and counted in the averages. Returns show as CAGR, the average yearly growth rate over a period.

Within a category, check each fund's riskometer level, which can change month to month. Check which tax test it is likely to meet. And check its expense ratio, the yearly fee as a share of your money, taken out of the fund's value.

The growth option pays nothing out and keeps the money invested. The regular plan is the version bought through a distributor such as Koshex, who helps you choose and stays with you afterwards.