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Everything you need to know about conservative hybrid funds


If you are looking for investment opportunities in the market, conservative hybrid funds can be an option. Many investors prefer investing in conservative hybrid funds because the risks presented by these funds are typically lower than other funds. 

If you want to learn more, this article will help you with what are conservative hybrid funds, features of conservative funds and a list of conservative mutual funds. 

What are conservative hybrid funds?

Conservative hybrid funds are a subcategory of mutual funds. A major chunk of the total assets in these funds are invested in debt instruments. Around 75% to 90% of the total assets are invested in debt instruments, while only around 10% to 25% of the total assets are invested in equity. 

Having a major part of the assets invested in debt securities makes conservative hybrid funds highly safe and risk-free. Due to this reason, investors can potentially gain inflation-beating returns and keep their money safe simultaneously. 

Conservative hybrid fund taxation is a common query of investors. Conservative hybrid fund investments held for more than 3 years are termed as Long Term Capital Gain (LTCG) while if the investments are sold within 3 years, they are termed as Short Term Capital Gain (STCG).

Some of the best conservative mutual funds include ICICI Prudential Regular Savings Fund, Canara Robeco Conservative Hybrid Fund, Kotak Debt Hybrid Fund, and SBI Conservative Hybrid Fund. Investing in these funds can help you earn attractive returns. 

Advantages of conservative hybrid funds

The following are the advantages of conservative hybrid funds.

1. Low risk

The primary focus of conservative hybrid funds is to safeguard the investment and offer returns while eliminating high risks. As most of the money is invested in debt securities, market fluctuations do not affect conservative mutual funds, making them less risky. 

2. Diversified portfolio

One of the most important benefits of conservative hybrid funds is portfolio diversification. Diversification plays a vital role in mitigating the risks of market volatility and allows investors to potentially gain attractive returns. A conservative hybrid fund helps investors diversify their portfolios by investing in debt and equity. 

3. Stability

Conservative hybrid funds work on the principle of providing decent returns with fewer risks associated with the investment than many other investment avenues. With a significant amount of the funds being invested in debts and a small amount invested in equity, these investments offer stability to grow your capital. Conservative hybrid funds can be considered an ideal combination of growth and stability.

4. Reduced volatility

If the majority of funds are invested in equity instruments, the funds might be affected by market fluctuations because the changes in the market can have a direct impact on equity instruments. However, as a major portion of the funds is invested in debt securities, they can be safe from these fluctuations resulting in increased safety and reduced volatility. 

Factors to consider before investing in conservative hybrid funds

Before investing in a conservative hybrid fund, you must consider some factors. Some of them are listed below.

1. Fund allocation

It involves researching which debt instrument the fund invests in. It allows you to gauge whether your investment goals are going to be met or not. It also helps you to make sound decisions and understand the level of risk associated with the fund.

2. Past performance

You should look into the past performance of the conservative hybrid fund to identify any anomalies before investing. 

3. Track record of fund manager

The track record of the fund manager should also be checked before investing in conservative hybrid funds because they are the ones who are going to manage your funds. So if they have a good track record it means they are good at managing funds and are less likely to make mistakes. 

4. Returns

Another important factor to consider before investing in a conservative hybrid fund is the returns it offers. The returns provided by the fund should perform well compared to its peers.

 5. Expense ratio

You should choose a fund with a lower expense ratio. The expense ratio is the amount the company charges annually for administrative tasks and operating expenses, such as paying the fund managers. 

Who should invest in conservative hybrid funds?

Conservative Hybrid funds help in preserving your capital with a stable income. As a result, investors who are going to retire soon can find conservative hybrid funds useful. The risks in conservative hybrid funds are typically lower than those associated with other investment schemes, such as aggressive hybrid funds and pure equity funds. 

If you are seeking higher returns than FDs or are interested in getting exposure to equity with minimal risks, you may consider investing in conservative hybrid funds. The small portion of assets invested in equity can help you earn better returns in comparison to fixed-income funds, liquid funds, or ultra-short-duration funds. 


Investing in conservative hybrid funds offers good returns and low risks making them highly popular mutual funds. The benefits of these funds include less risk, reduced volatility, market participation, stability, and portfolio diversification.

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Is investing in conservative hybrid funds a safe option?

Yes, investing in conservative hybrid funds is a safe option because a bigger part of the funds is invested in debt securities reducing market risks. 

What percentage of the portfolio should be allocated to conservative hybrid funds?

Investing is a personalised journey, and there’s no one-size-fits-all solution since every investor has unique goals, income levels, and risk thresholds. If you seek a secure avenue for your portfolio with a touch of equity exposure, conservative hybrid funds might align well with your aspirations. 

How long should you invest in conservative hybrid funds?

To get the best result from your investment, you must invest your money for at least 3 years in conservative hybrid funds. 

How can you invest in conservative hybrid funds?

To invest in a conservative hybrid fund, you must choose a fund house, open a mutual fund account, complete the necessary documentation, select a conservative hybrid fund, decide on the investment amount, and initiate the investment. 

How does risk in conservative hybrid funds compare to other investment options?

The risk in conservative hybrid funds is moderate compared to other investment options with higher or lower risks. For example, the risk in debt funds is lower, while the risk in equity funds is higher than in conservative hybrid funds. 

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