Tips To Choose The Best Aggressive Hybrid Fund With High Return

 

Investing in an aggressive hybrid fund has become a popular strategy for those looking to achieve high returns with a moderate level of risk. These funds invest in both equities and debt instruments, striking a balance between growth and stability. While selecting the best aggressive hybrid fund, consider the following tips to make informed decisions.

**1. Analyze Fund Allocation:** Primary to choosing an aggressive hybrid fund is understanding its asset allocation. Typically, these funds allocate 65-80% of their portfolio to equities and the remaining 20-35% to debt instruments. Evaluate the sectors and companies where the fund invests its equity portion. Higher allocation in high-growth sectors often indicates potential higher returns but might come with increased risk. Similarly, assess the quality of debt instruments in the fund to ensure financial stability.

**2. Historical Performance:** Primary to a good investment decision is analyzing historical performance. Go through past performance data of the fund for at least five years. A consistent track record of returns, especially during market downturns, demonstrates the fund manager's proficiency. For instance, if a fund has given an average annual return of 12% over the past five years, an initial investment of INR 1,00,000 would grow to approximately INR 1,76,234, showcasing competence in volatile markets.

**3. Expense Ratio and Fund Management:** Primary aspects like the expense ratio and the fund management team play crucial roles in returns. Lower expense ratios generally translate to higher net returns. Review the pedigree and experience of the fund management team. Funds managed by veteran managers with a proven track record tend to perform better. For example, an aggressive hybrid fund with an annual expense ratio of 1.5% compared to one with 2.5% can yield higher net returns on the same gross income.

**4. Risk Measures:** Evaluate risk-adjusted returns using measures such as Sharpe ratio and beta. A higher Sharpe ratio indicates better returns per unit of risk taken, while a lower beta suggests lower volatility compared to the market. For example, a fund with a Sharpe ratio of 1.2 and a beta of 0.85 offers prudence in balancing risk and returns.

**Disclaimer:** Investing in financial markets involves risks, and it is critical for investors to conduct thorough research and consider all pros and cons before making financial commitments. Always consult with a financial advisor to ensure the investment aligns with your financial goals and risk tolerance.

By heeding these considerations, investors can make informed choices and stand a chance to maximize returns while managing associated risks effectively.