The article takes a closer look at Hybrid Funds, their advantages, and future prospects in India.

An investor has various alternative avenues to invest his savings in. Hence, savings are productively invested in assets depending on their risk and return characteristics. The objective of the investor is to minimize the risk involved in investment and maximize the return from the investment.

Savings kept in the form of cash are not only unproductive as they do not earn anything, but also loses its value because of the rise in prices. Thus, rise in prices or inflation erodes the value of money. Savings are invested to provide a hedge or protection against inflation. If the investments cannot earn at par with the rise in prices, the real rate of return will be negative. Contrary to popular belief, mutual fund investing is not similar to equity investing. In fact, equity is just one of the various asset classes, mutual funds invest in. They also invest in debt instruments such as bonds, commercial papers and government securities, based on fund mandates. Each mutual fund has an investment objective or focus. Many funds have similar objectives and can be placed in groups called `styles'.

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