Best Canara Robeco Hybrid Mutual Funds

Incorporated in 1993, Canara Robeco Mutual Fund is one of the oldest AMCs in India. It began operations as a joint venture between Robeco Groep NV, a Dutch asset management firm, and Canbank Mutual Fund. As of March 31, 2021, this mutual fund house managed total assets worth approximately Rs.28241 crore.

Canara Robeco offers more than 20 mutual fund schemes to investors. These MF schemes comprise debt schemes, equity schemes, hybrid mutual funds, including the best Canara Robeco hybrid mutual funds.

A hybrid fund is a type of mutual fund scheme that invests in various kinds of securities. It predominantly invests in debt and equity. Hybrid funds function on three principles: allocate, correlate, and diversify.

These funds facilitate allocation by distributing wealth among multiple asset classes. Then, they enable correlation by way of co-movement of returns. The top Canara Robeco hybrid mutual funds encompass several assets in their portfolio, thereby achieving diversification.

Hybrid mutual funds allocate asset in equity and debt instruments. This blend of instruments allows the best Canara Robeco hybrid mutual funds 2023 to offer higher returns as compared to a regular debt fund scheme. Moreover, given that these MF schemes dilute the concentrated risk of investment, they tend to be safer compared to other aggressive or high-risk investment tools, such as equity mutual funds.

The best Canara Robeco hybrid mutual fund can be of two types: equity-oriented and debt-oriented schemes based on their core composition. Equity-oriented hybrid MFs invest predominantly in shares of companies that indicate high-growth potential. Conversely, debt-oriented hybrid mutual funds primarily consist of investments in fixed-income securities, such as commercial papers, debentures, corporate bonds, treasury bills, and government securities, among others.

Prospective investors can choose from more than 1 scheme under Canara Robeco Mutual Fund’s category of hybrid funds.

Taxability

However, one’s choice of investment should depend upon his/her investment objective and risk appetite. And, when investing in any of the best Canara Robeco hybrid mutual funds, he/she must also be aware of their tax treatment.

Long-term Capital Gains Tax (LTCGT): Equity-oriented hybrid MFs with at least 65% investment in equities are treated as equity schemes for taxation purposes. Therefore, when investors sell units from equity-based schemes after a holding period of 1 year, their capital gains exceeding Rs. 1 lakh are subject to 10% tax + cess + surcharge. Conversely, LTCG on debt-oriented hybrid funds is taxed at the rate of 20% along with cess and surcharge. 

Short-term Capital Gains Tax (STCGT): When an investor divests from an equity-oriented hybrid fund plan within 1 year from their purchase date, they are liable to pay 15% tax on capital gains with cess and surcharge. On the other hand, if one sells units of a debt-oriented hybrid MF before a holding period of 3 years, earnings are added to his/her taxable income. Here, the applicable rate of tax depends upon an investor’s income slab.

TDS: When investing in the best Canara Robeco hybrid mutual funds, investors must note that dividend pay-outs on equity-based hybrid MFs attract TDS at the rate of 10% if the dividend income exceeds Rs. 5,000 in a year. However, TDS is not applicable to debt-based hybrid mutual fund schemes.

Factors to Consider Before Investing

Alongside taxation, investors must also have a comprehensive understanding of several parameters before investing. This knowledge allows investors to choose a scheme that aligns with their investment objectives.

Risk factor: Any investment instrument engaged in the stock market carries risks to some extent. As a result, investing in hybrid funds comes with its share of risks. However, these funds are generally safer compared to pure equity mutual funds. Additionally, a debt-based hybrid fund tends to carry less market risk than equity-based plans but involve credit and inflation risks. 

Expense ratio: Mutual fund houses levy a fee for managing your investment portfolio, known as the expense ratio.

Exit load: AMCs levy a fee called exit load on their investors when they exit a scheme before its maturity period. Such a fee can be levied fully or partially, based on the exit period. However, a point to note here is that not all MF schemes levy this charge on investors. Therefore, prospective investors should look into these aspects of a scheme before investing.

Investment portfolio: As aforementioned, hybrid MFs carry a risk of investment, just as any mutual fund. Additionally, this risk is proportionate to a fund’s asset allocation. So, it is wise for investors to examine its portfolio and acquire a fundamental understanding of its associated risks. For instance, prior to investing in an equity-based hybrid fund, one can examine the types of stocks and instruments it comprises.  

Return: The performance of constituent instruments in a hybrid fund’s portfolio affects its Net Asset Value or NAV. Equity-based schemes are vulnerable to market movements, which results in higher returns during a bullish period. On the other hand, debt-oriented schemes deliver lower returns during bullish trends. Conversely, during the bearish period equity-oriented hybrid funds are exposed to greater risks when compared to most debt-oriented hybrid funds.