Best Aggressive Hybrid Mutual Funds

These funds can be found as the most suitable for:

1. Long-Term Investors: For those who plan on staying invested for a long period of time (typically five years), investing in such funds can be a good option because these funds likely show good results over a longer tenure. 
2. Investors with High-Risk Appetite: Though these funds aim at regular income and long-term wealth creation, they hold a hybrid portfolio, which means you are vulnerable to risky stocks too. Aggressive funds prioritize equity and equity-associated instruments, with smaller portions in debt for their stability. Therefore, these funds can match the investment goals of investors who are willing to take risks. 

The major factors to look into while picking the top aggressive mutual funds for investment are-

1. Risk-averse Investors Need to be Aware

Asset allocation is the most important factor to be considered before you can start investing. You will have to research the portfolio's investments and determine if they match your financial goals and risk appetite.

2. Expense Ratio

Like other kinds of mutual funds, this one, too, will have some fees and charges. You will have to pay fees for the management of your fund. Therefore, it is best advised to find funds that come with a lower expense ratio because high expense ratios can eat up your profit.

Here are some key benefits of investing in the best aggressive mutual funds:

Diversification: The portfolio of aggressive funds comprises high-risk, high-reward as well low-risk, low-reward asset categories – debt and equity.  Hence, these schemes offer diversification. While the equity component can generate high returns for investors, the debt securities can safeguard their portfolio value when there’s a correction. 

Tax benefits: Aggressive mutual funds invest at least 65% in equity and up to 35% in debt instruments. As per tax laws, they can enjoy the benefits of equity taxation even though a sizable portion of their portfolio comprises fixed income-generating securities. 

Less volatile than pure equity funds: The performance of pure equity funds is affected by volatile market conditions owing to price fluctuations of the underlying securities. Nevertheless, since aggressive funds also invest up to 35% of the assets in debt instruments, their performance is less impacted by market volatility. 

Portfolio rebalancing: The asset allocation of aggressive mutual funds is stringent, owing to SEBI guidelines. However, fund managers can rebalance the fund’s portfolio as per market conditions. In a bearish market, they can increase investment in debt instruments to hedge risk while keeping the allocation % within the pre-specified limit. On the contrary, in a bullish market, fund managers can increase the investment in equity to maximise returns. 

Investment route: Investors can allocate their funds to the best aggressive mutual funds via two modes – Systematic Investment Plan and lump sum. By opting for a SIP, individuals can pay a fixed amount at regular intervals to invest in a scheme of their choice. However, unlike a SIP, the lump sum route allows investors to allocate the entire amount at once.

Investing in the best aggressive funds is easy, but it has certain risks and limitations. Some of the prominent ones are-

1. High Amount of Risk: Aggressive funds invest in high-risk stocks, and these stocks hold the objective to generate greater returns. Typically, aiming for high returns leads to greater risks. 
2. Low Diversification: They can invest in limited and concentrated stocks, and it limits the diversification of the portfolio. 
3. Volatile: Aggressive funds come with higher allocation on equity stocks; this leads to higher volatility and, therefore, also increases risks. The debt allocation would usually minimize volatility, but that is not the case for these funds. 
4. Higher Expense Ratios: In these funds, the fund manager will manage both the equity funds and the debt funds, which bring in a higher expense ratio for the management of the fund. 

FAQs

Q1. What is meant by an aggressive fund?

An aggressive fund is a mutual fund that seeks capital gains through investments in shares of hybrid funds.

Q2. Are aggressive funds safe to invest in?

Aggressive mutual funds come with a lot of risks, therefore, they would not be a suitable investment for risk-averse investors (given most of their investments are in equities).

Q3. What is the time horizon to invest in aggressive mutual funds?

For an investor to profit from these investments, the investor needs to stay invested for a period of 3+ years. By staying invested for over three years, you can profit since there is a wide range of short-term fluctuations associated with the fund. 

Q4. How much of the portfolio of an aggressive fund is invested in safe assets?

About 25% of the fund's portfolio would contain FD-like assets to provide a cushion-like feature to the fund and not all risks and volatility. 

Q5. Who can invest in aggressive funds?

Investors who wish to start investing in equity funds but do not have the risk tolerance or expertise to manage equities can get started with these funds in particular. 

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.