Some mutual funds which invest in a mix of equity and debt and such schemes are known as hybrid schemes. Hybrid schemes use asset allocation, portfolio diversification, and market analysis to make certain that the investor is getting maximum returns at minimum risk. Their schemes can be both equity-oriented or debt-oriented which highly depends on the allocation to debt and equity.
Equity – oriented hybrid mutual fund which is also known as balanced funds, allocates over 65% of corpus or investment resources in purchasing the equity stock of the company and remaining is invested in debt securities. This scheme provides high returns and reduces the risk of exposure.
Debt – oriented hybrid mutual fund which is also known as monthly income plan, invests over 75% of their investment resources of a corpus in bonds, treasury bills, money market instruments and other debt instruments and remaining is invested in equity stocks on companies. This plan offers in providing regular income to the investors in the form of dividends.
The scheme will invest in equity stock of the companies for long term capital appreciation and will invest in debt instruments and government bonds for short term income generation.