Best Axis Hybrid Mutual Funds

Axis Mutual Fund was incorporated in 2009 as a joint venture between Schroder Singapore Holdings Private Limited (SSHPL) and Axis Bank. It is one of India’s largest asset management companies in terms of AUM. 

This fund house offers more than 40 schemes across various categories to investors. These investment schemes include debt schemes, equity schemes, and several hybrid funds, among others.

A hybrid fund is a type of mutual fund scheme that invests in various kinds of securities, primarily debt and equity. These funds operate on three key philosophies: allocate, correlate, and diversify. 

Hybrid mutual funds enable asset allocation by distributing wealth in different asset classes. They then facilitate correlation through the co-movement of returns. The best Axis hybrid funds achieve effective diversification by way of incorporating multiple assets in their portfolio. 

Hybrid mutual funds invest in both equity and debt instruments in 40% - 60% proportion. Investing in a blend of these instruments allows the top Axis hybrid funds to offer higher returns compared to a regular debt mutual fund scheme. Moreover, as they dilute the associated risks, these funds are considered to be safer than aggressive and high-risk investment tools, such as equity MFs. 

The best Axis hybrid funds 2023 are of two types – equity-oriented and debt-oriented. Equity-based funds invest predominantly in stocks of companies. Conversely, debt-based hybrid schemes primarily comprise investments in fixed-income securities like corporate and government bonds. 

Prospective investors can choose from more than 5 Axis hybrid mutual fund schemes.

Factors to Consider Before Investing

The choice of investment should depend upon investors’ investment objective and risk appetite. Additionally, a comprehensive understanding of several parameters is essential when investing in the top Axis hybrid mutual funds.

Risk factor: Although hybrid funds are less risky than pure equity MFs, any instrument that invests in stock markets carries some risk. Regular portfolio balancing can, therefore, lower the concentrated risk of investment. Typically, debt-oriented hybrid schemes involve less market risk than equity-oriented plans. These plans, however, involve a higher share of credit and inflation risks. 

Return: The performance of constituent securities in a hybrid fund affects its Net Asset Value (NAV). Equity-based mutual fund schemes are subject to market movements while debt-based plans rely on the creditworthiness of the companies.

Expense ratio: Mutual fund houses charge a fee for managing your investment portfolio, which is called its expense ratio. The expense ratio is adjusted in the NAV values. 

Investment portfolio: These funds carry an investment risk proportionate to their asset allocation. Analysing a portfolio is imperative to gain a concrete understanding of the risks involved. For instance, when investing in equity-oriented hybrid funds, investors can look into the kind of funds and stocks they own. 

Experience of the fund manager: It is also essential to examine the experience of a fund manager when investing in any of the best Axis hybrid mutual funds. This analysis provides fundamental knowledge about the individual’s efficiency in manoeuvring the fund through varying market conditions. 

Past performance of the fund: Prior to investing in any fund, it is critical to review its past performance. Although previous performance is not necessarily an apt indicator of probable returns, it certainly offers insights into the returns observed in various market conditions over a prolonged period.

Exit load: Exit load in mutual funds is the fee charged by an AMC if investors exit a scheme either fully or partially within a certain period from their date of investment. However, certain MF schemes may not call for an exit load. Therefore, it is wise to evaluate these aspects beforehand.

Taxability

Alongside prior information about such parameters of the best Axis hybrid funds, investors must also understand their taxability. 

Long-term capital gains tax: Equity-oriented funds – with more than 60% investment in stocks – are treated as equity schemes for taxation purposes. If units from such a scheme are sold after 1 year from the purchase date, such capital gains exceeding Rs.1 lakh attract a 10% tax.

Similarly, debt-based schemes – with more than 60% investment in debt securities – are considered pure debt MFs for taxation purposes. Proceeds from their sale qualify as LTCG if sold after 3 years. This gain attracts a 20% tax with indexation benefits. 

Short-term capital gains tax: If an investor sells an equity-based Axis hybrid MF scheme before 1 year, they need to pay a 15% tax + 4% cess on the gains. On the other hand, earnings from the sale of a debt-based scheme are added to an investor’s taxable income if they sell those units before 3 years. This tax rate depends on such an individual’s tax slab in this regard. 

TDS: It is not applicable to debt-based schemes. However, dividend payouts on equity-oriented plans are taxed at 10% if more than Rs. 5000.