Best Hybrid Mutual Funds - Review 2025
Hybrid funds are becoming very popular in the investment market of Indians who are seeking a balance between growth and safety. These funds provide the mid-range between equity and debt funds with moderate risks offering a middle ground between wealth creation and risky funds. Individuals who are new to mutual funds or those who want to diversify their portfolios in 2025 need to know about the best performing hybrid funds.
What are Hybrid Mutual Funds and Why are they So important?
Hybrid mutual funds are mutual funds that invest in a combination of the equity (stocks), debt (bonds) and even gold or any other asset category. Their allocation is unique and therefore they are able to manage market volatility and still have the potential of capital appreciation. This renders hybrid funds most suitable to investors who require superior returns than those of pure debt funds and reduce volatility as compared to pure equity funds.
Hybrid funds are of different categories:
- Aggressive Hybrid Funds (greater equity ratio)
- Conservative Hybrid Funds (increased investment in debt)
- Balanced Hybrid Funds (greater evenly distributed asset allocation)
- Active Funds or Balanced Advantage Funds (动管 Mix)
- Equity Savings Funds (add arbitrage to integrate risk)
What Are the Major Characteristics of the Best Hybrid funds in 2025?
The best hybrid mutual funds in 2025 will have some key highlights which are:
- Varying asset portfolio guarantees risk mitigation.
- Active rebalancing as the market conditions vary through professional fund management.
- Disciplined investing- Systematic Investment Plans (SIPs).
- Appropriate in short and long term investment.
- Depending on allocation tax benefits such as equity or debt schemes.
Who is the Right Investor in Hybrid Mutual Funds?
The hybrid funds are appropriate in:
- Novice investors with a risk balanced profile.
- Seniors seeking a retirement income stream.
- Long term investors who do not want to be affected with a lot of downside during volatile periods.
- Emergency fund builders with a growth potential.
Expert Opinion: Financial planners recommend the hybrid funds to investors who believe that pure equity is too risky but do not expect to receive low returns on the fixed deposits in 2025.
What Kinds of Hybrid Funds Worked in 2024 and at the beginning of 2025?
Balanced Advantage Funds and Aggressive Hybrid Funds have been performing better than other types in the recent period and this is due to the management of the assets, which are active, and the favourable market conditions on the equity market.
It has essential types and their estimated returns.
| Type of Fund | 1yr Avg. Return (%) | 4 recommended investment horizon (yrs) |
|---|---|---|
| Aggressive Hybrid | 19 to 22 | 3 to 5 |
| Balanced Advantage | 15 to 17 | 3 to 5 |
| Conservative Hybrid | 8 to 11 | 2+ |
| Equity Savings | 7 to 10 | 2 to 3 |
Advantages and Disadvantages of the greatest types of Hybrid funds
Aggressive Hybrid Funds
- Greater returns prospect by investing between 65 and 80 percent in equity.
- Perfect match to long term investors.
- More risk than the conservative funds.
Balanced Advantage Funds
- Active alternative between debt and equity in accordance with the market trends.
- Eliminate risk in market crashes by switching to debt.
- Minor declines in good bull markets.
Conservative Hybrid Funds
- Appropriate in low risk appetite.
- Provide regular income
- Limited growth potential
Did You Know? Most dominant Balanced Advantage Funds have been able to provide lesser volatility than Nifty 50 even amidst recent corrections.
Which Are the 5 Best Hybrid Funds in India 2025?
These are the commonly known hybrid funds whose performance is good, strong portfolio and strong management:
- HDFC Balanced Advantage Fund.
- Valuation model based, dynamic asset allocation.
- Good performance history.
- Volatility control rebalancing on a regular basis.
- ICICI prudential equity and debt fund.
- Braidy hybrid fund, which has a greater equity content.
- run by reputable high-ranking funds managers.
- Always rated as one of the best aggressive hybrid schemes.
- SBI Equity Hybrid Fund
- Appropriate to the long term investor with stable growth.
- Good quality debt and heavy allocation to large caps.
- Just great historical payout at reduced cost percentage.
- Edelweiss Balanced Advantage Fund.
- More sophisticated quant based asset allocation model.
- Pay attention to reducing the downside risk.
- Increasing popularity of young investors.
- Kotak Debt Hybrid Fund
- Conservative common stock with high-above average debt.
- Favorable to capital protection seekers as well as higher than FD returns.
| Fund Name | 1 Yr Return (percent) | 3 Yr Return (percent) | Expense Ratio (percent) | AUM (cr) |
|---|---|---|---|---|
| HDFC Balanced Advantage | 17.8 | 15.3 | 1.02 | 74200 |
| ICICI Prudential Equity and Debt | 20.1 | 17.9 | 1.13 | 41500 |
| SBI Equity Hybrid | 16.6 | 15.4 | 0.97 | 65000 |
| Edelweiss Balanced Advantage | 15.9 | 14.4 | 0.99 | 16200. |
| Kotak Debt Hybrid | 9.2 | 8.6 | 1.01 | 6900 |
How to Select the best Hybrid Fund in 2025?
To choose the most appropriate hybrid mutual fund, one has to take into account a number of factors:
- Investment objective and level of risk.
- Minimum investment period (smaller with conservative, and larger with aggressive funds)
- Consistency of past performance in market cycles.
- Track record and reputation of fund house and fund manager.
- The ratio of expenses and fund size that can affect the total returns.
Key Features to Assess
- Active and passive style of management.
- The frequency of portfolio rebalancing and methodology.
- Exposure to midcap or smallcap stocks or to largecap stocks.
Pros
- Reduces risk in turbulent markets.
- Growth and stability are provided.
- Reduced tax on equity based hybrid funds with a holding period of more than one year.
Cons
- Does not guarantee returns
- Funds that are equities based can plummet when the market crashes.
- May does not achieve well on bull markets of pure equity funds.
Expert Thought: According to some financial advisors, Balanced Advantage Funds are a core portfolio pick because this type of investment can automatically switch allocation in the uncertain interest rate environment in 2025.
Investment in Hybrid Funds? What is the Taxation?
Tax treatment is based on the character of the fund, equity or more debt-based.
- Hybrid funds with high equity (more than 65 per cent equity): Taxed as equity; LTCG tax 10 per cent on amounts in excess of 1 lakh held more than one year, STCG tax 15 per cent on less.
- Debt-based hybrid funds: Taxed as a debt fund; gain is added to income and taxed according to income bracket in case of holding period of less than three years. In case of retention and taxed at 20 per cent with indexation till the year 2023-24 indexation benefit has been restricted in new purchasing.
Which Investment Strategy is the best with Hybrid mutual funds?
Maximum benefit comes at the cost of adopting the following approaches:
- Rupee cost averaging should be done using SIP route when investing in aggressive and balanced funds.
- The lumpsum investment may be made at times of the market corrections at a higher rate.
- Discuss hybrid funds in systematic withdrawal plans (SWP) after the retirement.
Pros
- Investment flexibility in the form and quantity.
- Single product readymade diversification.
- There is no active monitoring required as is the case with direct equity.
Cons
- Still not completely predictable returns.
- Shortly, some funds can carry a high exit load.
Did You Know? Recent statistics indicate that investors who have been investing in SIPs in Balanced Advantage Funds since 2021, have performed better than their lump sum investing counterparts due to the reduced average cost per unit.
What Does Hybrid mutual funds require?
Hybrid funds, though balanced, nevertheless carry with them some underlying risks:
- Volatility in equity market can affect returns.
- Risks of debt portion- credit risk on high yields debt papers.
- Fund managers may have poor performance because of the wrong timing of asset allocation.
Advantages
- Minimize the possibility of losses both through equity and debt.
- A controllable risk as opposed to pure equity funds.
Drawbacks
- No basic security of capital.
- Both asset classes may be affected by sudden macroeconomic events.
Expert Insight: A significant number of the top hybrid funds today have risk models in place to track and mitigate credit and interest rate risk that will help the investors in the fast-evolving market environment in 2025.
What are Some of the Things First-Time Investors Need to know Before they Invest in Hybrid Funds?
Remember to consider some of the investment rules:
- Check mix and volatility range in portfolio.
- Compare trailing returns with category average not top year returns alone.
- Know about lock-in, exit loads and liquidity requirements.
People Also Ask
Is it possible to use hybrid funds to provide consistent monthly income?
Yes, you can get regular distributions, out of SWP (Systematic Withdrawal Plan) or by selecting conservative hybrid or monthly income plans, based on the policy of the scheme and the market conditions.
Better Balanced Advantage or Aggressive Hybrid Fund?
Balanced Advantage Funds are well suited to moderate risk takers and permits automated switches between equity and debt. The Hybrid Funds are aggressive in nature offering greater return with increased risk. Select according to your own time horizon and risk aversion.
Fast Review: Best Hybrid Mutual Funds 2025
Hybrid mutual funds give an optimistic way of investing in the equity and the debt markets.
The 2024-2025 top performers in the performance of Balanced Advantage and Aggressive Hybrid Funds were at the lead.
The best funds are HDFC Balanced Advantage, ICICI Prudential Equity and Debt and SBI Equity Hybrid Fund.
Select funds according to risk-taking, time horizon and fund manager performance.
Look at the charges and know the dangers before investing.
People Also Ask (FAQ)
How are hybrid funds and balanced funds different?
In 2017 SEBI circular under hybrid funds, balanced funds were reclassified as a boarder category along with aggressive, balanced advantage, conservative and equity savings funds.
How frequently is it recommended that I monitor my hybrid fund portfolio?
Performance should be reviewed at least once a year or when you are at significant events in the market. SIPs can have a 3 to 5 year plan without having to think of the short-term fluctuations.
Are hybrid funds safe in 2025?
Hybrid funds compromise risk in terms of asset allocation as compared to pure equity, yet it is not particularly safe as fixed deposit or government bonds. A fund type should always be matched with your risk profile.
What is the best hybrid fund in terms of short term?
Conservative hybrid or equity savings funds are the best option over less time, in this case less than 3 years as a result of reduced equity exposure and the volatility in the short term.
Are hybrid funds appropriate with retirees?
Yes, particularly conservative hybrid and Balanced Advantage Funds because they seek to combine safety, income and partial growth.
Is it possible to change to debt to hybrid fund at any time?
Switching can be done but take note of their exit loads, tax and market conditions that can influence returns in the act of switching.
Sources
- SEBI Categorisation of Mutual Funds.
- Value Research Fund Ratings 2025
- AMFI Mutual Fund Data
